1. The Gardeners’ Store Co. reported an ROE of 9.2% and a ROA of 5.0% for the year. Which statement is true concerning The Gardeners’ Store Co.?
A. It distributed 4.2% of its profits as dividends to its investors
B. It effectively utilized financial leverage
C. It generated more operating income than cash flows during the year
D. Its debt is equal to 4.2% of total assets
2. In 2016, Adams Company reported a return on assets of 16 percent and an asset turnover of 1.5. In 2017, the company reported a return on assets of 20 percent but an asset turnover of only 1.1. If sales revenue remained unchanged from 2016 to 2017, what would explain the two ratio results?
A. Sales and net income increase while total assets remained unchanged.
B. Sales and total assets increased at the same rate while net income grew less fast.
C. Net income increased faster than total assets, while sales remained unchanged.
D. None of the above