For a Given Level of Profitability as Measured by Profit

question 9

Multiple Choice

For a given level of profitability as measured by profit margin, the firm's return on equity will

• A) increase as its debt-to-assets ratio decreases.
• B) decrease as its current ratio increases.
• C) increase as its debt-to-assets ratio increases.
• D) decrease as its times-interest-earned ratio decreases.

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Definitions:

Price Floor

Government-imposed minimum price (used almost exclusively to keep agricultural commodity prices up).

Productivity

Output per unit of input; efficiency with which resources are used.

Acre of Land

A unit of area used in the United States and the United Kingdom, equivalent to 43,560 square feet.

Price Mechanism

The system by which the forces of supply and demand determine the prices of goods and services and allocate resources in an economy.