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.

Which of the following is true?

Neither firm needs to make any improvement.

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

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

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.