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.

---

Definitions:

Macroeconomic Instability

Occurs when an economy experiences high levels of volatility in factors such as inflation, growth rates, and unemployment, often leading to economic downturns.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others, promoting trading benefits.

Trade Patterns

The trends and regularities observed in international trade, including what goods and services are traded, and with which partners countries trade.

Tight Money Policy

A monetary policy strategy aiming to reduce the money supply in the economy to control inflation or stabilize the currency.