You observe that a firm's profit margin is below the industry average, its debt ratio is below the industry average, and its return on equity exceeds the industry average. What can you conclude?
A) Return on assets is above the industry average.
B) Total assets turnover is above the industry average.
C) Total assets turnover is below the industry average.
D) Both statements a and b are correct.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

The firm's return on equity (ROE) is high despite a low profit margin and low debt ratio, indicating that the firm likely has a high total assets turnover to compensate and achieve a high ROE.

You Observe That a Firm's Profit Margin Is Below the Industry