For a Given Level of Profitability as Measured by Profit

question 9

Multiple Choice

For a given level of profitability as measured by profit margin, the firm's return on equity will

• A) increase as its debt-to-assets ratio decreases.
• B) decrease as its current ratio increases.
• C) increase as its debt-to-assets ratio increases.
• D) decrease as its times-interest-earned ratio decreases.

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Definitions:

Monetary Damages

Financial compensation awarded to an individual for loss or injury as a result of the violation of a legal right.

Injunction

A legal order issued by a court that compels a party to do or refrain from specific acts.

Judicial Proceeding

A formal process before a court of law involving the adjudication of legal claims or disputes.

Contract

An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.