Which of the Following Statements Is CORRECT

question 18

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm lowered its fixed costs while increasing its variable costs, holding total costs at the present level of sales constant, this would decrease its operating leverage.
• B) The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price.
• C) If a company were to issue debt and use the money to repurchase common stock, this action would have no impact on its return on invested capital.(Assume that the repurchase has no impact on the company's operating income.)
• D) If changes in the bankruptcy code made bankruptcy less costly to corporations, this would likely reduce the average corporation's debt ratio.
• E) Increasing financial leverage is one way to increase a firm's return on invested capital.

---

Definitions:

Contraries

Assertions or claims that are mutually exclusive in truth but can simultaneously be incorrect.

Contrapositive

In logic, a statement formed by negating both the hypothesis and conclusion of the converse of a conditional statement and then reversing them.

Proposition

A statement that expresses a judgment or opinion that can be either true or false.

Relationship

The manner by which two or more ideas, items, or individuals are linked together, or the condition of being linked.