In the Dupont Equation, What Effect Does an Increase in a Firm's

question 82

Multiple Choice

In the Dupont Equation, what effect does an increase in a firm's borrowing costs (i.e., a higher interest rate) have on its net profit margin?

• A)Remain unchanged
• B)Decline by a lot with a high interest rate
• C)Decline by a little with a low interest rate
• D)It will increase

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Definitions:

Common Stock

Equity ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Accounts Payable

Obligations or amounts owed by a business to suppliers or vendors for goods and services received.

Inventory

The goods and materials a business holds for the ultimate goal of resale or production.

Amortization

The process of spreading out a loan into a series of fixed payments over time, which includes both principal and interest.