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Higher Debt Utilization Ratios Will Always Increase a Firm's Return

question 52

True/False

Higher debt utilization ratios will always increase a firm's return on equity given a positive return on assets.


Definitions:

Pretax Return

The financial return on an investment before any taxes are deducted.

Taxable Investor

An individual or entity that is subject to taxes on investment income and capital gains, affecting investment choices and strategies to minimize tax liabilities.

After-tax Return

The profit realized from an investment after all applicable taxes have been subtracted, representing the actual benefit to the investor.

Purchasing Power

Purchasing power refers to the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy, often used to measure the effect of inflation on income.

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