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.

---

Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to ensure accuracy.

Accounts Receivable

Dues from clients to a corporation for goods or services already benefited from but yet to be paid for.

Debit Entries

Accounting records that increase an asset or expense account, or decrease a liability, equity, or revenue account.

Credit Entries

Accounting entries that increase liability or equity accounts or decrease asset or expense accounts.