Assume BGL Enterprises increases its operating efficiency by lowering its costs while holding its sales constant.As a result,given all else constant,the:
A)return on equity will increase.
B)return on assets will decrease.
C)profit margin will decline.
D)total debt ratio will decrease.
E)price-earnings ratio will increase.

Question

Quizplus · Accepted Answer

By lowering its costs while holding sales constant, BGL Enterprises will increase its net income. This will result in an increase in return on equity, as net income is a component of this ratio. The other options are not necessarily true as there is no information given regarding changes in assets, profit margin, total debt ratio, or price-earnings ratio.

Assume BGL Enterprises Increases Its Operating Efficiency by Lowering Its