If You Opt to Purchase Shares of Stock on Margin

question 41

Multiple Choice

If you opt to purchase shares of stock on margin rather than with cash, you will:

• A)decrease your maximum potential rate of return.
• B)increase your maximum potential rate of return.
• C)guarantee yourself a profit.
• D)eliminate any potential profit.
• E)have equal rates of return regardless of how the purchase is made.

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Definitions:

Quick Ratio

A measure of a company's ability to meet its short-term liabilities with its most liquid assets, providing insights into financial health.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of a business, whichever is longer.

Current Liabilities

Short-term financial obligations due within one year or within the normal operating cycle of the business.

Total Debt Ratio

A financial metric that compares the total liabilities of a company to its total assets, indicating how much of the company's assets are financed by debt.