Which of the Following Statements Is Incorrect

question 103

Multiple Choice

Which of the following statements is incorrect?

• A) The equity multiplier is equal to 1 plus the debt-equity ratio.
• B) Return on equity is equal to the return on assets multiplied by the equity multiplier.
• C) Return on equity is equal to total equity divided by net income.
• D) Return on equity is equal to the equity multiplier multiplied by the total asset turnover multiplied by the profit margin.
• E) The difference between the asset multiplier and liability multiplier equals the equity multiplier.

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Definitions:

Liable

Legally responsible or answerable for an action or a situation.

Scope of Authority

The range or extent of power that an individual or organization legally has to make decisions or take action.

Agent

An individual or entity authorized to act on behalf of another person or entity in business matters or legal transactions.

Liable

Legally responsible for one's actions or for a particular outcome.