__________ would best explain a situation where the ratio of (net income/total equity)of a firm is higher than the industry average,while the ratio of (net income/total assets)is lower than the industry average.
A) The firm's net profit margin is higher than the industry average
B) The firm's asset turnover is higher than the industry average
C) The firm's equity multiplier must be lower than the industry average
D) The firm's debt ratio is higher than the industry average
E) None of these

Question

Quizplus · Accepted Answer

A higher debt ratio indicates that the firm uses more debt financing, which increases the equity multiplier, leading to a higher return on equity (net income/total equity) despite a lower return on assets (net income/total assets).

__________ Would Best Explain a Situation Where the Ratio of (Net