20.A company's Return on assets has increased from the previous period, yet its Return on equity has decreased.

Which of the following is the most likely explanation for this?

a.An increase in the company's mark-up.

b.An increase in the corporate tax rate. c.An increase in the company's share price.

d.A decrease in the company's debt ratio.

e.A significant transfer from Retained profits to Reserves during the period

21.Which of the following is the most likely characteristic of a company with a high asset turnover and a low EBIT profit margin?

a.The company sells large volumes of high-priced goods.

b.The company sells small volumes of high-priced goods.

c.The company sells small volumes of low-priced goods.

d.The company sells large volumes of low-priced goods.

e.These ratios would not indicate anything about the company's sales volumes or selling prices.

22.Which of the following best explains why an excessively high quick ratio would be viewed unfavourably?

a.It suggests the entity is holding excessive amounts of cash that represents an idle asset.

b.It suggests the entity has excessive inventory which is a sign of an inefficient operating strategy.

c.It suggests the entity is exposed to a high level of risk.

d.It suggests the entity has excessive receivables which suggests the entity is poor at generating cash from its sales.

e.All of these explain why an excessively high quick ratio would be viewed unfavourably.