Which of the Following Statements Is Most Correct

question 74

Multiple Choice

Which of the following statements is most correct?

• A) If a firm's ROE and ROA are the same, this implies that the firm is financed entirely with common equity. (That is, common equity = total assets).
• B) If a firm has no lease payments or sinking fund payments, its times-interest-earned (TIE) ratio and fixed charge coverage ratios must be the same.
• C) If Firm A has a higher market to book ratio than Firm B, then Firm A must also have a higher price earnings ratio (P/E).
• D) All of the statements above are correct.
• E) Answers a and b are correct.

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Definitions:

Journal Entries

Records of financial transactions in the accounting system, indicating the accounts affected and the debit and credit amounts.

Indirect Materials

Materials used in the production process that cannot be easily traced to specific products, such as lubricants and cleaning supplies.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Manufacturing Overhead

Includes all manufacturing costs other than direct materials and direct labor, encompassing expenses such as depreciation, electricity, and maintenance of factory facilities.