If a Firm Decreases Its Operating Costs, All Else Constant

question 19

Multiple Choice

If a firm decreases its operating costs, all else constant, then:

• A) The profit margin increases while the return on equity decreases.
• B) The return on assets increases while the return on equity decreases.
• C) The total asset turnover rate decreases while the profit margin increases.
• D) Both the profit margin and the equity multiplier increase.
• E) Both the return on assets and the return on equity increase.

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Definitions:

Seminal Vesicles

Glands in the male reproductive system that produce and secrete fluid that is a major component of semen.

Peristaltic Contractions

Wave-like muscle contractions that move food through the digestive tract.

Secondary Oocyte

Oocyte in which the second meiotic division stops at metaphase II unless fertilization occurs.

Corpus Luteum

Yellow endocrine body formed in the ovary in the site of a ruptured vesicular follicle immediately after ovulation; secretes progesterone and estrogen.