Holding All Other Factors Constant, If a Firm Increases Its

question 94

Multiple Choice

Holding all other factors constant, if a firm increases its current liabilities relative to total assets, an immediate effect will be that

• A)it increases return and reduces risk.its financing costs will rise.
• B)it has no effect on return and increases risknet working capital will rise.
• C)it reduces return and reduces risk.its current ratio will rise.
• D)it reduces return and increases risk.
• E)none of above are correct

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting beliefs, values, or attitudes.

Scientific Process

A methodical approach to inquiry that involves the systematic observation, measurement, experimentation, formulation, testing, and modification of hypotheses.

Deduction

A logical process where a conclusion follows necessarily from the given premises; moving from general principles to specific instances.

Scope

The extent or range of view, reach, or application, often defining the boundaries of a project, study, or activity.