Ratios Using the firm's data provided below explain why the firm's ROA is less than the industry average of 43% given that the industry average asset turnover is 1.16.

Sales	$	170	(mill)
EBIT	$	60
Interest Expense	$	15
Assets	$	150
Equity	$	50
Net Profit	$	25

a) The firm is not generating enough sales from assets and has too much debt. b)The firm has too high an interest burden ratio. c)The firm is not generating enough sales from assets and has too high operating costs. d) The firm uses less debt than the industry.

Glowworms Inc has sales of $375,000, cost of goods sold of $295,000, average inventory of $45,000 and average receivables of $52,000. Industry average inventory period is 60 days and industry average days sales in receivables is 69 days. All else the same, which of the following conclusions about Glowworm's ROA is correct?

a) Glowworms has a lower ROA than the industry average.

b) One can't tell whether Glowworms has a higher or lower ROA than the industry average because the inventory period is lower than the industry average but their days sales in receivables are higher than the industry average.

c)One can't tell whether Glowworms has a higher or lower ROA than the industry average because the inventory period is higher than the industry average but their days sales in receivables are lower than the industry average.

d)Glowworms has a higher ROA than the industry average.

Answer rating: 100% (QA)

For the first question the correct answer is c The firm is not generating enough sales from assets a... View the full answer