IIA
IIA-CIA-PART3 · Question #5
Which of the following scenarios indicates an effective use of financial leverage?
The correct answer is B. An organization has a current ratio of 2 and an inventory turnover of 12. See the full explanation below for the reasoning.
Question
Which of the following scenarios indicates an effective use of financial leverage?
Options
- AAn organisation has a rate of return on equity of 20% and a rate of return on assets of 15%.
- BAn organization has a current ratio of 2 and an inventory turnover of 12.
- CAn organization has a debt to total assets ratio of 0.2 and an interest coverage ratio of 10.
- DAn organization has a profit margin of 30% and an assets turnover of 7%.
How the community answered
(15 responses)- A13% (2)
- B73% (11)
- C7% (1)
- D7% (1)
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