Which of the Following Statements Is True

question 62

Multiple Choice

Which of the following statements is true?

• A)The greater the use of debt, the higher the P/E ratio of a firm will be.
• B)Debt has no effect on the P/E ratio of a firm.
• C)Debt has an effect on the P/E ratio of a firm, but it may cause either an increase or a decrease in the ratio, depending on whether or not the firm is a growth firm.
• D)The greater the use of debt, the lower the P/E ratio of a firm will be.

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Definitions:

Serial Position

A cognitive phenomenon where an individual is more likely to recall the first and last items in a series of objects or words, known as the primacy and recency effect, respectively.

Primacy Effect

The tendency to remember information that is presented first more effectively than information that is presented later.

Recency Effect

A psychological phenomenon where the most recently presented items or experiences are more likely to be remembered than those presented earlier.

Rote Rehearsal

A memorization technique based on repetition, where information is repeated over and over to keep it in short-term memory for longer periods.