Which of the Following Statements Is Correct

question 70

Multiple Choice

Which of the following statements is correct?

• A)The use of debt financing will tend to lower the basic earning power ratio, other things held constant.
• B)A firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure.
• C)If two firms have identical sales, interest rates paid, operating costs, and assets, but differ in the way they are financed, the firm with less debt will generally have the higher expected ROE.
• D)Holding bonds is better than holding stock for investors because income from bonds is taxed on a more favourable basis than income from stock.

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Definitions:

Promotional Campaign

A series of targeted marketing actions intended to increase awareness, interest, and sales of a product or service.

Legal Time Limit

A statutory duration defined by law within which actions, claims, or appeals can be initiated or enforced.

Financial Liability

A financial obligation or amount owed by an individual or entity to another individual or entity.

Direct Communication

A method of conveying messages or information straightforwardly between parties without intermediaries.