Which of the Following Statements Is Most Correct

question 64

Multiple Choice

Which of the following statements is most correct?

• A) If Company A has a higher debt ratio than Company B, then we can be sure that A will have a lower times-interest-earned ratio than B.
• B) Suppose two companies have identical operations in terms of sales, cost of goods sold, interest rate on debt, and assets. However, Company A uses more debt than Company B; that is, Company A has a higher debt ratio. Under these conditions, we would expect B's profit margin to be higher than A's.
• C) The ROE of any company which is earning positive profits and which has a positive net worth (or common equity) must exceed the company's ROA.
• D) Statements a, b, and c are true.
• E) Statements a, b, and c are false.

Understand the distinctions between administrative and criminal laws.

Acknowledge the requirement for administrative decisions to comply with the principles of natural justice.

Realize the implications of administrative control over business activities, including registration and licensing requirements.

Understand the impact of government regulation on the freedom of individuals and the creation of a bureaucracy.

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Definitions:

Variable Cost

Costs that change in proportion to the level of output or activity in a business.

Fixed Costs

Costs that do not vary in proportion to the level of goods or services produced by a business, such as rent, salaries, and insurance premiums.

Operating Leverage

Operating Leverage is a measure of how revenue growth translates into growth in operating income, determined by the proportion of fixed versus variable costs a company has.

Variable Cost

Operational expenses of a business that alter in accordance with the level of activity.