Which of the following 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 the above.

Question

Quizplus · Accepted Answer

A higher equity multiplier, which results from a higher debt ratio, can lead to a higher return on equity (net income/total equity) even if the return on assets (net income/total assets) is lower.

Which of the Following Would Best Explain a Situation Where