Which of the Following Statements Is CORRECT

question 104

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.

---

Definitions:

Simp

A slang term describing someone who performs excessive sympathy or attention towards another person, often in pursuit of romantic affection.

Add

To combine or join one thing with another, increasing the amount, number, or the total.

Inference Forms

Logical sequences in which the conclusion is a direct result of the premises presented.

MP

Short for Member of Parliament, an individual elected to serve as a representative of the citizens in the parliamentary government.