In a Typical Year Which of the Following Measures of Aggregate

question 29

Multiple Choice

In a typical year which of the following measures of aggregate output and income is likely to be the smallest?

• A)gross domestic product
• B)net domestic income
• C)disposable income
• D)personal income

Understand the concept and calculation of return on equity (ROE).

Compute basic earning power (BEP) and comprehend its significance.

Evaluate corporate financing decisions using debt ratio targets.

Understand the impact of financial leverage on company performance and risk.

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Definitions:

Workout Agreement

A formal contract between a debtor and his or her creditors in which the parties agree to negotiate a payment plan for the amount due on the loan instead of proceeding to foreclosure.

Mortgage Loan

A loan secured by the collateral of real estate property, where the borrower is obliged to pay back with a predetermined set of payments.

Personal Guaranty

A legal commitment by an individual to repay a loan or debt in the event that the primary borrower defaults.

Main Purpose Rule

A legal principle that exempts a guarantor from the requirement of a written contract if the primary intent of the guarantee is to serve the guarantor's own interests.