Based on the following information from ABC Company's financial analysis, which one of the following statements is true? Ratio Gross profit ratio Net profit ratio PP&E turnover ratio Current ratio Debt to equity Return on equity Year 1 35.7% 11.7% 14.2 5.4 1.5 12.6% Year 2 34.6% 12.5% 13.8 6.7 1.3 14.5% Year 3 36.9% 14.9% 4.9 6.1 0.8 14.1% Year 4 38.6% 15.1% 72 72 0.7 15.7% Year 5 41.5% 18.3 % 9.4 6.3 0.4 16.2% The company has increased operating expenses over the five years. The company's ability to cover its short-term obligations is getting higher over the five years. The company's ability to cover its long-term debt is getting lower over the five years. The company might have invested too much PP&E in year 3
Based on the following information from ABC Company's financial analysis, which one of the following statements is true? Ratio Gross profit ratio Net profit ratio PP&E turnover ratio Current ratio Debt to equity Return on equity Year 1 35.7% 11.7% 14.2 5.4 1.5 12.6% Year 2 34.6% 12.5% 13.8 6.7 1.3 14.5% Year 3 36.9% 14.9% 4.9 6.1 0.8 14.1% Year 4 38.6% 15.1% 72 72 0.7 15.7% Year 5 41.5% 18.3 % 9.4 6.3 0.4 16.2% The company has increased operating expenses over the five years. The company's ability to cover its short-term obligations is getting higher over the five years. The company's ability to cover its long-term debt is getting lower over the five years. The company might have invested too much PP&E in year 3
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Please also explain why other options are incorrect
Transcribed Image Text:Based on the following information from ABC Company's financial analysis, which one of the
following statements is true?
Ratio
Gross profit ratio
Net profit ratio
PP&E turnover ratio
Current ratio
Debt to equity
Return on equity
Year 1
35.7%
11.7%
14.2
5.4
1.5
12.6%
Year 2
34.6%
12.5%
13.8
6.7
1.3
14.5%
Year 3
36.9%
14.9%
4.9
6.1
0.8
14.1%
Year 4
38.6%
15.1%
72
7.2
0.7
15.7%
Year 5
41.5%
18.3%
9.4
The company has increased operating expenses over the five years.
The company's ability to cover its short-term obligations is getting higher over the five years.
The company's ability to cover its long-term debt is getting lower over the five years.
The company might have invested too much PP&E in year 3.
6.3
0.4
16.2%
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