The mere fact that a firm is earning high rates of return on the firm's asset indicates that
A)the firm is worth more as a going concern than as a dead one.
B)downsizing is likely to be an economically sound option for the business.
C)it is time to start growing the business again.
D)it might be wise to further limit the cash flows returned to investors.

Question

Quizplus · Accepted Answer

A high rate of return on assets indicates that the firm is utilizing its resources efficiently, is generating profits, and is a valuable business as a going concern. This suggests that investors can expect to receive higher returns over time and that the firm has potential for growth and expansion. Downsizing or limiting cash flows returned to investors may not be necessary or beneficial in this scenario.

The Mere Fact That a Firm Is Earning High Rates