Which of the Following Statements Is Most Correct

question 88

Multiple Choice

Which of the following statements is most correct?

• A) If Firms A and B have the same level of earnings per share, and the same market to book ratio, they must have the same price earnings ratio.
• B) Firms A and B have the same level of net income, taxes paid, and total assets. If Firm A has a higher interest expense, its basic earnings power ratio (BEP) must be greater than that of Firm B.
• C) Firms A and B have the same level of net income. If Firm A has a higher interest expense, its return on equity (ROE) must be greater than that of Firm B.
• D) All of the answers above are correct.
• E) None of the answers above is correct.

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Definitions:

Price Level

Price level is the average of current prices across the entire spectrum of goods and services produced in the economy, used to measure inflation or deflation.

Aggregate Supply Curve

An illustrative chart that demonstrates the aggregate supply of goods and services that producers within an economy are prepared to provide at varying prices.

Aggregate Demand Curve

The Aggregate Demand Curve represents the total amount of goods and services demanded across all levels of an economy at various price levels.

Aggregate Demand Curve

Represents the total demand for goods and services within an economy at different price levels, assuming all other factors remain constant.