If a fiRm Acquires More Long-Term Debt While Also Issuing

question 338

Multiple Choice

If a firm acquires more long-term debt while also issuing additional shares of stock, then the:

• A) Debt-equity ratio will increase.
• B) Debt-equity ratio will decrease.
• C) Debt equity ratio will remain constant.
• D) Change in the debt-equity ratio cannot be determined from the information provided.
• E) Net Income will increase.

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Definitions:

State Unemployment Taxes

Taxes imposed by state governments on businesses based on the amount of wages paid to employees, used to fund unemployment compensation programs.

Employer Payroll Tax Rates

The percentage rates at which employers are required to tax their employees' wages for federal and state payroll taxes.

FICA Social Security Taxes

Taxes paid by both employers and employees to fund the Social Security program, determined as a percentage of payroll.

FICA Medicare Taxes

These are taxes collected from both employers and employees in the United States to fund the Medicare program, which provides healthcare benefits for qualified individuals.