What Is Primarily Responsible for the Potential Distortion Among the ROA

question 23

Multiple Choice

What is primarily responsible for the potential distortion among the ROA of different firms when net income is used in the numerator of ROA?

• A)firms have different dividend payout ratios.
• B)some firms use fully depreciated assets.
• C)financial leverage varies among firms.
• D)unprofitable firms will not have any tax liability.

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Definitions:

Legal Duty

An obligation imposed by law where an individual is required to adhere to a standard of reasonable care while performing any acts that could harm others.

Superseding Cause

refers to an unforeseeable event that interrupts the chain of causation and becomes the primary reason for an injury, thereby relieving the defendant from liability in a negligence claim.

Causal Chain

A sequence of events where each event is the result of the preceding one and causes the next.

Unforeseeable Event

An event that cannot be anticipated or predicted with reasonable accuracy.