Which of the Following Statements Is CORRECT

question 44

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 the profit margin.

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Definitions:

Exchange Rates

The rate at which one currency can be exchanged for another.

Interest Rates

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, per period.

Inflation

The speed at which the overall price level of goods and services increases, diminishing the buying power.

Financial Distress Costs

The direct and indirect costs associated with going bankrupt or experiencing financial distress.