If a Firm Has No Debt and EBIT Increases by 10

question 24

Multiple Choice

If a firm has no debt and EBIT increases by 10%, then one can expect ____.

• A)EPS to increase by more than 10%
• B)ROE to increase by less than 10%
• C)net income to increase by 10%
• D)ROCE to be less than ROE

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Definitions:

Average Cost

The total cost of production divided by the quantity of output produced, representing the per unit cost of production.

Signaling Mechanism

A method or action taken to convey information or intentions between parties, often used in economics and biology to indicate quality or status.

Screening Mechanism

A process or method used by entities to filter or select suitable candidates or options based on specific criteria.

Engagement Ring

A piece of jewelry often featuring diamonds or other gemstones, traditionally given during a proposal to symbolize intent to marry.