The Use of Debt in the Firm's Capital Structure Will

question 62

Multiple Choice

The use of debt in the firm's capital structure will increase ROE if the firm:

• A) has more debt than equity.
• B) pays less in taxes than in interest.
• C) earns a higher return than the rate paid on debt.
• D) has a times interest earned ratio greater than 1.0.

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Definitions:

Standard Deviation

A statistical measure of the dispersion or variability of a data set around its mean.

Frequency Distribution

A statistical representation showing the number of instances in which a variable takes each of its possible values.

Linear Regression Line

A line that approximates the points on a scatterplot which can be used to show a trend and make predictions; also called a line of best fit or least squares line.

Scatterplot

A graph that shows the relationship of bivariate data using points on the coordinate grid.