Which of the following statements is correct?
A)All other things being equal, the more efficiently a company utilizes its assets, the greater will be its return on investment.
B)All other things being equal, if return on equity increases, the return on assets must have also increased.
C)All other things being equal, if the number of days inventory held increases, the return on assets will increase.
D)All other things being equal, if the gross margin decreases, the inventory turnover must have increased.

Question

Quizplus · Accepted Answer

The statement in option A is correct. Efficient utilization of assets will result in a higher return on investment. Option B is incorrect because return on equity can increase without any change in return on assets if the company uses more debt financing. Option C is incorrect because an increase in the number of days inventory held would decrease the return on assets because it ties up resources that could be used elsewhere. Option D is incorrect because a decrease in gross margin would usually indicate lower inventory turnover.

Which of the Following Statements Is Correct