If ROC Is Less Than a Firm's Cost of Capital,which

question 61

Multiple Choice

If ROC is less than a firm's cost of capital,which of the following must be true?

• A) The firm's EVA is positive.
• B) The firm's EVA is negative.
• C) The firm's ROE is equal to zero.
• D) The firm's ROE is negative.

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Definitions:

Common-Sized Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across periods and with other companies.

Net Income

Net income is the total earnings of a company after subtracting all expenses and taxes from total revenue, indicating the company's profitability over a specific period.

Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets.

Short-Term Debt

Borrowings that are due for repayment within one year, used to finance immediate expenses or working capital requirements.