Which of the Following Statements Is Correct

question 79

Multiple Choice

Which of the following statements is correct?

• A) If Company A has a higher debt ratio than Company B,then we can be sure that A will have a lower times-interest-earned ratio than B.
• B) Suppose two companies have identical operations in terms of sales,cost of goods sold,interest rate on debt,and assets.However,Company A uses more debt than Company B;that is,Company A has a higher debt ratio.Under these conditions,we would expect B's profit margin to be higher than A's.
• C) The ROE of any company which is earning positive profits and which has a positive net worth (or common equity)must exceed the company's ROA.
• D) Statements a,b,and c are all true.
• E) Statements a,b,and c are all false.

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Definitions:

Inventory Increase

A rise in the quantity or value of goods and materials that a company holds for the purpose of sale or production.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, reflected in the cash flow statement.

Bonds Payable

Long-term liabilities representing money owed by a corporation or government to bondholders, to be repaid at a future date.

Receipts

Refers to the total amount of money received by a company during a specific period, often from sales of goods or services.