A Company Has a Debt-To-Assets Ratio of 0

question 8

Multiple Choice

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%.If the company then issues additional shares of common stock for cash,which of the following is a correct 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:

Department

A distinct part of an organization with a specific function or group of related functions.

Process Costing

An accounting methodology used for distributing costs to each unit of output in continuous production processes.

Journal Entries

The basic method of recording financial transactions in accounting, ensuring every transaction reflects both a debit and a credit.

Transactions

Financial activities or events that affect the financial position of a company, involving the exchange or transfer of goods, services, or funds.