Asked by Annie Vatterott on Jun 10, 2024

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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.
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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.