Which of the Following Statements Is Most Correct

question 72

Multiple Choice

Which of the following statements is most correct?

• A) An increase in a firm's debt ratio, with no changes in its sales and operating costs, could be expected to lower its profit margin on sales.
• B) An increase in the DSO, other things held constant, would generally lead to an increase in the total asset turnover ratio.
• C) An increase in the DSO, other things held constant, would generally lead to an increase in the ROE.
• D) In a competitive economy, where all firms earn similar returns on equity, one would expect to find lower profit margins for airlines, which require a lot of fixed assets relative to sales, than for fresh fish markets.
• E) It is more important to adjust the Debt/Assets ratio than the inventory turnover ratio to account for seasonal fluctuations.

Calculate the present value of a single amount and an annuity.

Interpret the results of financial calculations to make investment decisions.

Understand the concept of an annuity and its relevance in investment decisions.

Apply the concept of present value index in evaluating investment proposals.

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Definitions:

Allocation Base

A criterion or measure used for distributing overhead costs among various cost objects, such as departments or products.

Fixed

Expenses that do not change in total over a short period, regardless of the level of production or sales activity, such as rent, salaries, or insurance.

Classified

Pertains to information, documents, or materials that have been deemed confidential and are restricted to certain levels of access.

Merchandising Company

A type of business that purchases finished goods and sells them to consumers without changing their form.