Practice prompt · Q:financial-statement-performance-and-returns/same-roa-different-drivers-001

Choose the bounded conclusion from equal ROA

Formative interpretation item separating mathematical attribution from unsupported business cause.

Updated Sep 10, 2026 Review due Nov 7, 2026

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Maple reports $240,000 net sales, $24,000 net income, and $200,000 average total assets. Quarry reports $450,000 net sales, $36,000 net income, and $300,000 average total assets. Maple's margin is 10% and turnover is 1.20. Quarry's margin is 8% and turnover is 1.50. Each company reports 12% ROA. Which conclusion stays within the evidence?

Choose the best answer. A The equal 12% ROA proves that both companies have identical operations and risk B Quarry's higher turnover proves better asset management C Quarry's higher turnover offsets its lower margin mathematically; operational causes require additional price, mix, cost, capacity, asset, and trend evidence D Maple's higher margin proves that its earnings convert to cash more effectively

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Answer: C

Choice C is the supported conclusion. The decomposition attributes the equal ROA to different mathematical factors. It does not identify why those factors differ or establish operational quality, persistence, cash conversion, risk, or value.