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

Question

Quizplus · Accepted Answer

Efficient utilization of assets leads to higher return on investment.

Option B is incorrect as there could be other factors affecting return on equity apart from return on assets.

Option C is incorrect as holding inventory for a longer period of time has a negative impact on return on assets.

Option D is incorrect as decreasing gross margin may indicate a decrease in inventory turnover.

Which of the Following Statements Is Correct