Which of the Following Statements Is CORRECT

question 55

Multiple Choice

Which of the following statements is CORRECT?

• A) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will increase.
• B) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Without additional information, we cannot tell what will happen to the ROE.
• C) The DuPont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE.
• D) Other things held constant, an increase in the debt ratio will result in an increase in the profit margin.
• E) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will decrease.

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Definitions:

Kidney

An organ in vertebrates that filters waste products from blood to produce urine.

CGN

Chronic glomerulonephritis, a type of kidney disease that involves the slow progression of glomerular inflammation and damage.

Meaning

The interpretation or explanation of a concept, text, or action.

Nephron

The functional unit of the kidney responsible for filtering blood and producing urine.