Which of the Following Statements Is Correct

question 50

Multiple Choice

Which of the following statements is correct?

• A)Repayment of a bond on the first day of the fiscal year will decrease the shareholders' return on equity.
• B)Conversion of a 10% bond with no short term maturity, into common shares on the first day of the year will have no effect the current ratio.
• C)The sale of 2,000 common shares for cash will improve the shareholders' return on equity.
• D)The sale of $5,000 of inventory on credit for $6,000 will have no effect on the operating margin.

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Definitions:

Bubbles

Economic phenomena characterized by rapid increases in asset prices to levels significantly above their fundamental values, followed by abrupt crashes.

Demand

The desire combined with the ability to purchase a specific quantity of a good or service at a particular price and time.

Supply

The total amount of a product or service available for purchase at any given price point in a market.

Purchasing Power Parity

A theory in economics that suggests that in the absence of transaction costs and other barriers, identical goods should have the same price in different countries when prices are expressed in a common currency.