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Question 5 - IIA-CIA-Part3 discussion

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Which of the following scenarios indicates an effective use of financial leverage?

A.
An organisation has a rate of return on equity of 20% and a rate of return on assets of 15%.
Answers
A.
An organisation has a rate of return on equity of 20% and a rate of return on assets of 15%.
B.
An organization has a current ratio of 2 and an inventory turnover of 12.
Answers
B.
An organization has a current ratio of 2 and an inventory turnover of 12.
C.
An organization has a debt to total assets ratio of 0.2 and an interest coverage ratio of 10.
Answers
C.
An organization has a debt to total assets ratio of 0.2 and an interest coverage ratio of 10.
D.
An organization has a profit margin of 30% and an assets turnover of 7%.
Answers
D.
An organization has a profit margin of 30% and an assets turnover of 7%.
Suggested answer: B
asked 18/09/2024
lawrence Ajibolade
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