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Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4.From this we know that: a. Firm A has a higher profit margin than firm B. b. Firm B has a higher profit margin than firm A. c. Firm A and B have the same profit margin. d. Firm A has a higher equity multiplier than firm B. e. You need more information to say anything about the firm's profit margin.

Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4.From this we know that: a. Firm A has a higher profit margin than firm B. b. Firm B has a higher profit margin than firm A. c. Firm A and B have the same profit margin. d. Firm A has a higher equity multiplier than firm B. e. You need more information to say anything about the firm's profit margin.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4.From this we know that: a. Firm A has a higher profit margin than firm B. b. Firm B has a higher profit margin than firm A. c. Firm A and B have the same profit margin. d. Firm A has a higher equity multiplier than firm B. e. You need more information to say anything about the firm's profit margin.
Transcribed Image Text:Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4.From this we know that: a. Firm A has a higher profit margin than firm B. b. Firm B has a higher profit margin than firm A. c. Firm A and B have the same profit margin. d. Firm A has a higher equity multiplier than firm B. e. You need more information to say anything about the firm's profit margin.
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