Although Company A and Company B have similar returns on 口 equity, what is the primary driver for each company having a higher return than the industry? Net Proft Entity Total Asset Leverage Return on Margin Turnover Multiplier Equity Company A 7% 1.25 2.5 21.88% Company B 15% 1.30 1.3 25.35% Industry 8% 1.30 1.5 15.6% O Company A is more efficient at using its assets to generate sales, while Company B uses a significantly higher amount of debt to purchase assets. O Company A is more efficient at using its operations to generate profits, while Company B is more efficient than the industry at using its assets to generate sales. O Company A and Company B are both more efficient at using their assets to generate sales as compared to the industry average. O Company A uses a significantly higher amount of debt to purchase assets, while Company B has better operating efficiency.

Although Company A and Company B have similar returns on 口 equity, what is the primary driver for each company having a higher return than the industry? Net Proft Entity Total Asset Leverage Return on Margin Turnover Multiplier Equity Company A 7% 1.25 2.5 21.88% Company B 15% 1.30 1.3 25.35% Industry 8% 1.30 1.5 15.6% O Company A is more efficient at using its assets to generate sales, while Company B uses a significantly higher amount of debt to purchase assets. O Company A is more efficient at using its operations to generate profits, while Company B is more efficient than the industry at using its assets to generate sales. O Company A and Company B are both more efficient at using their assets to generate sales as compared to the industry average. O Company A uses a significantly higher amount of debt to purchase assets, while Company B has better operating efficiency.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 6MC: Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC)....

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