ABC Corporation has seen its ROA decrease from 8% to 5% over the
past three years, while its Asset Turnover ratio has remained stable.
Which statement most likely explains this trend and its implications for
future performance?

Question

ABC Corporation has seen its ROA decrease from 8% to 5% over the 
past three years, while its Asset Turnover ratio has remained stable. 
Which statement most likely explains this trend and its implications for
 future performance?

Answer

The company's sales volume is decreasing, but this is a temporary 
market condition with minimal impact on long-term performance

Answer

The 
company is investing in high-quality assets that will generate higher 
returns in future periods, offsetting the current ROA decline

Answer

The 
company's profit margins are declining, suggesting potential issues with
 cost control that could negatively impact future profitability if not 
addressed

Answer

The company has increased its debt financing, which will likely improve future performance by enhancing financial leverage

Crowdly

ABC Corporation has seen its ROA decrease from 8% to 5% over the past three yea...

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