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

question 41

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 the above

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Definitions:

Proprietorship

A business owned and operated by a single individual, who is entitled to all profits and responsible for all debts.

Easy And Cheap

Descriptive terms indicating something is not difficult to do or obtain and does not require a lot of resources, specifically money, to acquire.

Service Business

A type of business that provides intangible products or services to customers, rather than producing tangible goods.

Health Club

A facility that offers health and fitness services, including exercise equipment, fitness classes, and sometimes additional amenities like pools and spas.