Which of the Following Statements Is Most Correct

question 10

Multiple Choice

Which of the following statements is most correct?

• A) A firm with financial leverage has a larger equity multiplier than an otherwise identical firm with no debt in its capital structure.
• B) The use of debt in a company's capital structure results in tax benefits to the investors who purchase the company's bonds.
• C) All else equal, a firm with a higher debt ratio will have a lower basic earning power ratio.
• D) All of the answers above are correct.
• E) Answers a and c are correct.

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Definitions:

Ambiguity

Ambiguity refers to the presence of uncertainty or the ability of something to have multiple interpretations or meanings.

Self-Awareness

The awareness of an individual's own personality, emotions, motivations, and wishes.

Overconfidence

A cognitive bias where an individual's subjective confidence in their judgments is greater than their objective accuracy.

Cultural Diversity

The existence of a variety of cultural or ethnic groups within a society, embracing differences in values, traditions, beliefs, and lifestyles.