All Else Equal, the Use of Debt Will

question 19

Multiple Choice

All else equal, the use of debt will

• A)result in both a lower earnings per share and a lower P/E ratio.
• B)result in a lower earnings per share and, thus, a higher P/E ratio.
• C)result in a higher earnings per share and, thus, a lower P/E ratio.
• D)None of the above is a true statement.

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Definitions:

Argument

A series of statements or reasons made to persuade others that an action or belief is right or wrong, usually concluding with a main assertion.

Independent Premises

Statements in an argument that do not rely on one another to support the conclusion.

Conclusion

The end or finish of an event, process, or text, often summarizing the arguments or results in a logical or analytical discourse.

Argument

A set of statements or reasons made to persuade others that an idea or opinion is correct or valid.