When the Return on Equity Is Equal to the Return

question 149

Multiple Choice

When the return on equity is equal to the return on capital employed:

• A)the return on borrowed money equals the cost of borrowing the money.
• B)the firm has optimized its financial leverage.
• C)the firm is unleveraged.
• D)All of the above

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Definitions:

Alternative Hypothesis

A hypothesis that directly contradicts the null hypothesis, suggesting that there is a significant effect or difference between groups or variables.

μ ≠ 3

Symbolic representation in hypothesis testing indicating that the population mean is not equal to 3, suggesting a two-tailed test.

Assumption

A basic condition that is accepted as true without proof in order to proceed with a calculation, argument, or analysis.

Non-directional Alternative Hypothesis

An alternative hypothesis that does not specify the direction of the expected difference or relationship, only that one exists.