Which of the Following Statements Is CORRECT

question 22

Multiple Choice

Which of the following statements is CORRECT?

• A)If one firm has a higher debt ratio than another, we can be certain that the firm with the higher debt ratio will have the lower TIE ratio, as that ratio depends entirely on the amount of debt a firm uses.
• B)A firm's use of debt will have no effect on its profit margin on sales.
• C)If two firms differ only in their use of debt-i.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax rates-but one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales.
• D)The debt ratio as it is generally calculated makes an adjustment for the use of assets leased under operating leases, so the debt ratios of firms that lease different percentages of their assets are still comparable.
• E)If two firms differ only in their use of debt-i.e., they have identical assets, sales, operating costs, and tax rates-but one firm has a higher debt ratio, the firm that uses more debt will have a higher profit margin on sales.

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Definitions:

Behaviourist Theory

A theory in psychology that focuses on observable behaviors and the ways they're learned, rather than internal states like thoughts or feelings.

Nativist Theory

The theory that human traits, especially language, are innate and coded into one's genetics.

Language Acquisition

The process by which humans acquire the capacity to perceive, produce, and use words to understand and communicate.

Heuristic

A problem-solving approach using practical methods or rules of thumb for making quick decisions, often sacrificing accuracy for speed.