Suppose You Work for the CFO of Danforth, Inc

question 236

Multiple Choice

Suppose you work for the CFO of Danforth, Inc. He believes sales and operating income will be sharply higher each year for the foreseeable future. If he seeks to maximize earnings per share, he should _____________. (Assume there are no taxes.)

• A) Increase the firm's debt to equity ratio.
• B) Increase the firm's debt to equity ratio if the firm's EBIT will remain below the break-even (comparing levered to unlevered) level of EBIT.
• C) Decrease the firm's debt to equity ratio.
• D) Not change the firm's debt to equity ratio.
• E) Decrease the firm's debt to equity ratio if the firm's EBIT will remain below the break-even (comparing levered to unlevered) level of EBIT.

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Definitions:

Institute Of Management Accountants

A professional organization focused on advancing the management accounting profession through research, education, and certification programs.

Ethical Professional Practice

The set of principles and standards that guide the behavior and decision-making of professionals to ensure integrity, fairness, and respect.

Period Costs

Expenses that are not directly tied to the production of goods and are instead expensed in the period they are incurred.

Manufacture Products

The process of converting raw materials or components into finished goods through the use of labor, machinery, and equipment, typically within an industrial setting.