BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant.As a result, given all else constant, the:
A)return on equity will increase.
B)return on assets will decrease.
C)profit margin will decline.
D)equity multiplier will decrease.
E)price-earnings ratio will increase.

Question

Quizplus · Accepted Answer

Increased operating efficiency that leads to cost decrease while sales remain constant will result in an increase in profitability. Since return on equity is a measure of profitability, it will increase. The return on assets, profit margin, equity multiplier, and price-earnings ratio are not directly impacted by changes in operating efficiency.

BGL Enterprises Increases Its Operating Efficiency Such That Costs Decrease