If a fiRm Decreases Its Operating Costs, All Else Constant

question 17

Multiple Choice

If a firm decreases its operating costs, all else constant, then:

• A) The profit margin increases while the return on equity decreases.
• B) The return on assets increases while the return on equity decreases.
• C) The total asset turnover rate decreases while the profit margin increases.
• D) Both the profit margin and the equity multiplier increase.
• E) Both the return on assets and the return on equity increase.

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Definitions:

Mere Exposure Effect

The psychological phenomenon whereby people tend to develop a preference for things merely because they are familiar with them.

Stimulus

Anything that can provoke a response or reaction from a biological organism or a system.

Conscious Awareness

The mental state of being fully engaged and aware of the present moment, including thoughts, feelings, and external environment.

Strongest

The most powerful, forceful, or capable in a particular group, area, or context.