Indicate Whether Each of the Following Statements About Financial Statement

Indicate whether each of the following statements about financial statement analysis is true or false.
1. The asset turnover ratio is calculated by dividing net income by average total assets.
2. The asset turnover ratio is likely to be high in an industry in which operations require only a minimal investment in assets.
3. Return on equity measures the wealth generated by the amount of assets invested in a business.
4. A higher value for the return on investment ratio would generally indicate more effective company management.
5. The use of financial leverage often causes a business's return on equity to be lower than its return on investment.

Correct Answer:

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1. False
2...

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