The Use of Debt in the Firm's Capital Structure Will

question 62

Multiple Choice

The use of debt in the firm's capital structure will increase ROE if the firm:

• A) has more debt than equity.
• B) pays less in taxes than in interest.
• C) earns a higher return than the rate paid on debt.
• D) has a times interest earned ratio greater than 1.0.

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Definitions:

Flexible Budget

A financial plan that is modified based on fluctuations in volume or levels of activity.

Meals Served

The total number of individual portions or servings of food provided or sold, typically used in the context of catering or hospitality.

Donations

Voluntary gifts or contributions of money or goods to organizations or individuals, often for charitable purposes.

Revenue Variance

The difference between a company's actual revenue and its expected or budgeted revenue during a specific period.