Which of the following would best explain a situation where the ratio of net income/total equity of a firm is higher than the industry average, while the ratio of net income/total assets is lower than the industry average?
A) The firm's net profit margin is higher than the industry average.
B) The firm's asset turnover is higher than the industry average.
C) The firm's equity multiplier must be lower than the industry average.
D) The firm's debt ratio is higher than the industry averagE.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

Assets are financed either by debt or equity. The situation described above could occur only if the firm is financing more assets with debt than are industry competitors.

Which of the Following Would Best Explain a Situation Where