The following question relates to PQR, which has the following ratios: return on assets, (ROA) 10 per cent; return on equity (ROE) 12 per cent; and current ratio (CR) of 1.8:1. Directors decided to revalue land upwards by $350 000. This transaction will:
A) increase ROA and ROE.
B) decrease ROA and ROE.
C) decrease ROA but have no effect on ROE.
D) have no effect.

Question

Quizplus · Accepted Answer

Revaluing land upwards increases total assets and equity, which decreases ROA and ROE since the net income remains unchanged.

The Following Question Relates to PQR, Which Has the Following