Which of the Following Statements Is CORRECT

question 22

Multiple Choice

Which of the following statements is CORRECT?

• A)If one firm has a higher debt ratio than another, we can be certain that the firm with the higher debt ratio will have the lower TIE ratio, as that ratio depends entirely on the amount of debt a firm uses.
• B)A firm's use of debt will have no effect on its profit margin on sales.
• C)If two firms differ only in their use of debt-i.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax rates-but one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales.
• D)The debt ratio as it is generally calculated makes an adjustment for the use of assets leased under operating leases, so the debt ratios of firms that lease different percentages of their assets are still comparable.
• E)If two firms differ only in their use of debt-i.e., they have identical assets, sales, operating costs, and tax rates-but one firm has a higher debt ratio, the firm that uses more debt will have a higher profit margin on sales.

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Definitions:

Preconscious

Part of the mind that contains thoughts and feelings that are not currently in conscious awareness but can be easily brought to consciousness.

Unconscious

Part of the mind that is not within thought's immediate awareness, influencing behaviors and thoughts without our knowing.

Sense of Self

An individual's perception of their personality traits, physical characteristics, abilities, values, goals, and roles that constitute their identity.

Unique

Being the only one of its kind; without an equal or equivalent; distinctly characteristic.