Low asset turnover ratios and high operating profit margins

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Reference no: EM131551373

True or False?

1. Luxury goods companies have low asset turnover ratios and high operating profit margins.

2. In project valuation, one of the advantages of the Payback rule is that it provides a simple way to communicate an idea of project profitability.

3. Equity investors are satisfied with the performance of a company when the cost of equity rE is higher than ROE (return on equity).

4. For Company A, the receivables turnover ratio increased in 2016 with respect to 2016. Therefore, its average collection period also increased in that period.

5. Because a firm that uses debt can be as profitable as a firm that does not, some financial ratios are calculated t with NOPAT (Net Operating Profit After Tax) rather than with net income.

6. In ROC (return on capital) the debt and equity values from the balance sheet are taken from the same year as the income statement.

7. ROA (return on assets) ca n be estimated by multiplying the operating profit margin by the asset turnover ratio.

Reference no: EM131551373

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