7) Which of the following is TRUE regarding the analysis of financial statements

Question

7) Which of the following is TRUE regarding the analysis of financial statements? A) A firm's equity multiplier always moves in the opposite direction from its debt-asset and debt-equity ratios. B) According to the DuPont framework, a firm's equity multiplier is inversely related to its net profit margin. C) A higher total asset turnover ratio indicates that a firm is better able to meet its interest payment obligations D) A comparison of Walmart and Target for 2017 would be an example of cross-section analysis.

Explanation / Answer

Ans is option A

Equity multiplier is asset/equity

And it moves against debt/equity and debt/asset

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