Which of the following statements is correct?
A)Purchasing fixed assets through debt financing decreases financial leverage.
B)Accruing an expense does not affect the net profit margin ratio.
C)Return on equity increases when the financial leverage ratio decreases.
D)Purchasing treasury stock results in a decrease in asset turnover.

Question

Quizplus · Accepted Answer

Purchasing treasury stock decreases average total assets, the asset turnover ratio denominator, which therefore increases the ratio.

Which of the Following Statements Is Correct