A Firm Has an ROE of -2%, a Debt/equity Ratio

question 35

Multiple Choice

A firm has an ROE of -2%, a debt/equity ratio of 1.0, a tax rate of 0%, and an interest rate on debt of 10%.The firm's ROA is

• A)2%.
• B)4%.
• C)6%.
• D)8%.

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Definitions:

Inframarginal Workers

Employees whose productivity and wage are above the minimum required for employment, but are not the highest performers.

Marginal Expenditure Curve

A graph that shows the additional cost of purchasing one more unit of a good or service.

Labor Supply Curve

The graphical representation of the relationship between different levels of wage and the quantity of labor willing to be supplied.

Monopsony

A market situation where there is only one buyer facing many sellers.