Which of the Following Statements Is CORRECT

question 66

Multiple Choice

Which of the following statements is CORRECT?

• A) The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the inventory turnover ratio.
• B) If two firms have the same ROA, the firm with the most debt can be expected to have the lower ROE.
• C) An increase in the DSO, other things held constant, could be expected to increase the total assets turnover ratio.
• D) An increase in the DSO, other things held constant, could be expected to increase the ROE.
• E) An increase in a firm's debt ratio, with no changes in its sales or operating costs, could be expected to lower its profit margin.

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Definitions:

Average Total Assets

A measure used to evaluate a company's efficiency and profitability, calculated by averaging the total assets at the beginning and end of an accounting period.

Stockholders' Equity

The portion of a company's assets that belongs to shareholders after deducting liabilities, representing ownership interest.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the company's profits or losses.

Retained Earnings

The segment of net profit held back by the business rather than being shared with its proprietors in the form of dividends.