Please use the following information for the next 2 questions.

You are given the information of firm A and B for their performance evaluation.

FIRM	A	B
Sales	15	20
EAT	2	2
Total Assets	25	40
Stockholder's Equity	10	10

Suppose the industry average of net profit margin ratio, total asset turnover and equity multiplier is around 10%, 0.58 times and 2.5 respectively.

1. Which firm appears to have problems?

A. Firm B has problems

B. Both of them have problems

2. Which of the following is true?

A. Firm B shall improve its total asset turnover ratio since it is lower than the industry average and thus indicates an inefficient utilization of assets.

B. Firm A shall restructure its capital structure to achieve a higher financial leverage since it appears to be lower than the industry average.