Which of the Following Statements Is Most Correct? If a Company

question 17

Multiple Choice

Which of the following statements is most correct? If a company lowers its DSO,but no changes occur in sales or operating costs,then

• A) the company might well end up with a higher debt ratio.
• B) the company might well end up with a lower debt ratio.
• C) the company would probably end up with a higher ROE.
• D) the company's total asset turnover ratio would probably decline.
• E) none of the above is a correct statement.

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Definitions:

Settlement Options

The various ways that an insurance policy or financial contract can be paid out to the beneficiary, including lump-sum payments and annuities.

Lump Sum Payment

A single payment made at a particular time, as opposed to multiple payments made over a period.

Present Value

The present fiscal value of a future sum of money or sequence of cash inflows, determined by a specified rate of return.

Perpetuity

A financial instrument or investment that generates a constant stream of cash flows with no end date.