Which of the following will cause an increase in net profit margin,asset turnover and financial leverage as long as expenses do not grow faster than revenue?

Question

Quizplus · Accepted Answer

An increase in sales volume will lead to an increase in revenue, which will cause an increase in net profit margin (assuming expenses do not grow faster than revenue) and asset turnover (measuring how efficiently the company uses its assets to generate revenue). Financial leverage, which measures the amount of debt the company uses to finance its operations, may also increase if the company takes on additional debt to finance its growth. However, decreasing total liabilities (choice D) would have the opposite effect on financial leverage, and decreasing average total assets (choice A) would likely decrease asset turnover. An increase in profit (choice C) may increase net profit margin, but without knowing the impact on revenue and expenses it is unclear whether it would impact asset turnover or financial leverage.

Which of the Following Will Cause an Increase in Net