Asked by Annie Vatterott on Jun 10, 2024
Verified
All else the same, lower return on assets (ROA) ratio would likely be associated with a firm which has a high capital intensity ratio, relative to other firms in the same industry.
Capital Intensity Ratio
A measure of how much capital is used in relation to labor in the production process of a company.
Return on Assets (ROA)
A profitability ratio calculated by dividing net income by total assets, indicating how efficiently a company is using its assets to generate profit.
- Understand the significance of capital intensity and the efficiency of asset management in corporate financial planning.
- Examine the impact of financial ratios like fixed asset turnover and return on assets on the performance of a company.
Verified Answer
SW
Shanette WarrenJun 17, 2024
Final Answer :
True
Explanation :
A high capital intensity ratio indicates a firm uses more assets relative to its revenue, which can lead to a lower return on assets (ROA) as ROA measures how efficiently a company uses its assets to generate profit.
Learning Objectives
- Understand the significance of capital intensity and the efficiency of asset management in corporate financial planning.
- Examine the impact of financial ratios like fixed asset turnover and return on assets on the performance of a company.
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