A firm has a Return on Assets and Return on Equity that are bothlower than...

A firm has a Return on Assets and Return on Equity that are both lower than its industry averages. Its Debt Ratio and Total Asset Turnover both equal its industry average. This firm’s main problem is that:

	a.	its debt is too low
	b.	its Return on Equity is too low.
	c.	its operating costs are too low.
	d.	its Profit Margin on Sales is too low.

Expert Solution

Its Debt Ratio and Total Asset Turnover both equal its industry average which means that Debt and Sales are in line with the industry while firm has a Return on Assets and Return on Equity that are both lower than its industry average which means that Net Income are low. i.e. Profit Margin on sales is too low,

Option d is correct.

jeff jeffy answered 2 years ago

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