Which of the Following Statements Is Incorrect

question 94

Multiple Choice

Which of the following statements is incorrect?

• A)Purchasing fixed assets through equity financing decreases asset turnover.
• B)Accruing an expense increases the financial leverage ratio.
• C)The return on equity ratio increases when treasury stock is purchased.
• D)The net profit margin ratio decreases when fixed assets are purchased.

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Definitions:

Real Wages

Wages or salaries adjusted for inflation, reflecting the true purchasing power of income.

Potential Output

The economy’s maximum sustainable output, given the supply of resources, technology, and rules of the game; the output level when there are no surprises about the price level.

Natural Rate

The natural rate refers to the long-term unemployment rate that an economy experiences under normal conditions, unaffected by short-term cyclical fluctuations.

Full-Employment

A scenario where an economy utilizes all accessible labor resources in the most optimized manner.