A Company Has a Debt to Assets Ratio of

question 36

Multiple Choice

A company has a debt to assets ratio of .45 and a return on equity ratio of 10%.If the company then issues common stock,which of the following is a true statement?

• A)The debt to assets ratio will decrease and the return on equity ratio will decrease.
• B)The debt to assets ratio will increase and the return on equity ratio will increase.
• C)The debt to assets ratio will not change and the return on equity ratio will not change.
• D)The debt to assets ratio will decrease and the return on equity ratio will increase.

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Definitions:

Total Utility

The total satisfaction or benefit obtained from consuming a particular quantity of goods or services.

Marginal Utility

Describes the additional satisfaction or usefulness obtained from consuming one more unit of a product or service.

Total Utility

The complete fulfillment experienced from the consumption of a specific overall amount of a product or service.

Consumer Surplus

The gap between what consumers are prepared and able to spend on a product or service and the actual sum they end up paying.