Which of the Following Statements Is Most Correct

question 54

Multiple Choice

Which of the following statements is most correct?

• A) The expected return on corporate bonds will generally exceed the yield to maturity.
• B) If a company increases its debt ratio, this is likely to reduce the default premium on its existing bonds.
• C) All else equal, senior debt will generally have a lower yield to maturity than subordinated debt.
• D) Answers a and c are correct.
• E) None of the answers above is correct.

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Definitions:

Margin of Safety

The difference between actual or expected sales and sales at the break-even point, indicating the cushion against losses.

Sales

The total amount of revenue generated from the selling of goods or services by a company during a specific period.

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis is a managerial accounting technique that analyzes how changes in costs and volume affect a company's operating income and net income.

Unit Contribution Margin

The amount each unit sold contributes towards fixed costs and profits, calculated by subtracting variable costs per unit from the selling price per unit.