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    You observe that a firm's profit margin is below the industry average, its debt ratio is below the industry average, and its return on equity exceeds the industry average. What can you conclude?
    a. Return on assets is above the industry average.
    b. Total assets turnover is above the industry average.
    c. Total assets turnover is below the industry average.
    d. Both statements a and b are correct.
    e. None of the statements above is correct.

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    Solution Preview

    Using the dupont equation: ROE=PM*TATO*EM

    PM is below average. EM is below average because a low debt ratio implies ...

    Solution Summary

    The solution explains the correct statement from the given alternatives