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:

Ethical Concern

Considerations related to the morality and principles guiding decisions, often arising in situations where choices affect well-being or rights of individuals and communities.

Human Laboratory Studies

Research conducted in controlled, laboratory settings that involve human participants to investigate a wide range of psychological, physiological, or behavioral phenomena.

Intentional Harm

The deliberate infliction of damage or injury upon another individual or group.

Aggression

A range of behaviors or actions intended to harm, intimidate, or assert dominance over others, often resulting from frustration, threats, or social learning.