Based on the following information from ABC Company's financial analysis, which one of the following statements is true? Ratio Gross profit ratio Net profit ratio PP&E turnover ratio Current ratio Debt to equity Return on equity Year 1 35.7% 11.7% 14.2 5.4 1.5 12.6% Year 2 34.6% 12.5% 13.8 6.7 1.3 14.5% Year 3 36.9% 14.9% 4.9 6.1 0.8 14.1% Year 4 38.6% 15.1% 72 72 0.7 15.7% Year 5 41.5% 18.3 % 9.4 6.3 0.4 16.2% The company has increased operating expenses over the five years. The company's ability to cover its short-term obligations is getting higher over the five years. The company's ability to cover its long-term debt is getting lower over the five years. The company might have invested too much PP&E in year 3

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
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Chapter7: Analysis Of Financial Statements
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Based on the following information from ABC Company's financial analysis, which one of the
following statements is true?
Ratio
Gross profit ratio
Net profit ratio
PP&E turnover ratio
Current ratio
Debt to equity
Return on equity
Year 1
35.7%
11.7%
14.2
5.4
1.5
12.6%
Year 2
34.6%
12.5%
13.8
6.7
1.3
14.5%
Year 3
36.9%
14.9%
4.9
6.1
0.8
14.1%
Year 4
38.6%
15.1%
72
7.2
0.7
15.7%
Year 5
41.5%
18.3%
9.4
The company has increased operating expenses over the five years.
The company's ability to cover its short-term obligations is getting higher over the five years.
The company's ability to cover its long-term debt is getting lower over the five years.
The company might have invested too much PP&E in year 3.
6.3
0.4
16.2%
Transcribed Image Text:Based on the following information from ABC Company's financial analysis, which one of the following statements is true? Ratio Gross profit ratio Net profit ratio PP&E turnover ratio Current ratio Debt to equity Return on equity Year 1 35.7% 11.7% 14.2 5.4 1.5 12.6% Year 2 34.6% 12.5% 13.8 6.7 1.3 14.5% Year 3 36.9% 14.9% 4.9 6.1 0.8 14.1% Year 4 38.6% 15.1% 72 7.2 0.7 15.7% Year 5 41.5% 18.3% 9.4 The company has increased operating expenses over the five years. The company's ability to cover its short-term obligations is getting higher over the five years. The company's ability to cover its long-term debt is getting lower over the five years. The company might have invested too much PP&E in year 3. 6.3 0.4 16.2%
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