If the Interest Rate on Debt Is Higher Than ROA,then

question 29

Multiple Choice

If the interest rate on debt is higher than ROA,then a firm will __________ by increasing the use of debt in the capital structure.

• A) increase the ROE
• B) not change the ROE
• C) decrease the ROE
• D) change the ROE in an indeterminable manner
• E) none of these

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Definitions:

Production Costs

The total expenses incurred in the manufacture of a product or the delivery of a service, including raw materials, labor, and overheads.

Relationship Marketing

A strategy designed to foster customer loyalty, interaction, and long-term engagement.

Customers

Individuals or organizations that purchase goods or services from a business.

Indirect Method

An accounting technique used in cash flow statements to convert net income into net cash flow from operating activities by adjusting for non-cash transactions.