Stennett Corp

question 82

Multiple Choice

Stennett Corp.'s CFO has proposed that the company issue new debt and use the proceeds to buy back common stock. Which of the following are likely to occur if this proposal is adopted? (Assume that the proposal would have no effect on the company's operating earnings.)

• A) Return on assets (ROA) will decline.
• B) The times interest earned ratio (TIE) will increase.
• C) Taxes paid will decline.
• D) None of the statements above is correct.
• E) Statements a and c are correct.

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Definitions:

Right-to-Work Laws

Right-to-Work Laws prevent unions and employers from requiring union membership for employment, enhancing individual freedom to choose.

National Labor Relations Board

An independent U.S. federal agency created to enforce labor laws concerning collective bargaining and unfair labor practices, ensuring employees' rights to organize and bargain collectively are protected.

Employee Empowerment

Giving employees responsibility and authority to make decisions regarding all aspects of product development or customer service.

Financial Constraints

Limitations on the availability or use of financial resources that affect an individual's or organization's ability to make decisions or transactions.