Which of the Following Statements Is CORRECT

question 8

Multiple Choice

Which of the following statements is CORRECT?

• A) Increasing its use of financial leverage is one way to increase a firm's basic earning power (BEP).
• B) If a firm lowered its fixed costs but increased its variable costs by just enough to hold total costs at the present level of sales constant, this would increase its operating leverage.
• C) The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price.
• D) If a company were to issue debt and use the money to repurchase common stock, this would reduce its basic earning power ratio. (Assume that the repurchase has no impact on the company's operating income.)
• E) If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to reduce corporations' debt ratios.

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Definitions:

Secure Form

A digital form that implements security measures to protect the data being transmitted from unauthorized access or alterations.

Importer's Bank

A financial institution that facilitates transactions, including payment, for a company importing goods from another country.

Small Scale Industry

A sector comprising of businesses that operate on a small scale, typically characterized by low investment, fewer employees, and less revenue compared to large-scale industries.

Open Account

A form of payment in which an importer doesn’t pay for goods until after they have been received, creating an unfavorable balance of value for the exporter.