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Ratio Analysis Answer: C Diff: M N
Ratio Analysis Answer: C Diff: M N
19. Drysdale Financial Company and Commerce Financial Company have the same total
assets, the same total assets turnover, and the same return on equity.
However, Drysdale has a higher return on assets than Commerce. Which of the
following can explain these ratios?
a. Drysdale has a higher profit margin and a higher debt ratio than
Commerce.
b. Drysdale has a lower profit margin and a lower debt ratio than Commerce.
c. Drysdale has a higher profit margin and a lower debt ratio than
Commerce.
d. Drysdale has lower net income but more common equity than Commerce.
e. Drysdale has a lower price earnings ratio than Commerce.
Chapter 3 - Page 5
Ratio analysis Answer: a Diff: M
20. You are an analyst following two companies, Company X and Company Y. You have
collected the following information:
Effects of leverage Answer: a Diff: M 21. Which of the following statements is most correct?