Which of the Following Statements Is CORRECT

question 72

Multiple Choice

Which of the following statements is CORRECT?

• A) if a firm lowered its fixed costs while increasing its variable costs, holding total costs at the present level of sales constant, this would decrease its operating leverage.
• B) the debt ratio that maximizes eps generally exceeds the debt ratio that maximizes share price.
• C) if a company were to issue debt and use the money to repurchase common stock, this action would have no impact on its basic earning power ratio. (assume that the repurchase has no impact on the company's operating income.)
• D) if changes in the bankruptcy code made bankruptcy less costly to corporations, this would likely reduce the average corporation's debt ratio.
• E) increasing financial leverage is one way to increase a firm's basic earning power (bep).

Identify and overcome obstacles and resistors to achieving personal and professional goals.

Recognize the role of mindset and attitude in filtering perception and affecting behavior.

Apply strategies to overcome barriers and foster a positive attitude towards change.

Develop actionable plans for career transitions and goal setting.

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Definitions:

Marginal Benefit

The extra pleasure or benefit gained by an individual from consuming one more unit of a product or service.

Profit-Maximizing Principle

The economic principle that firms operate to achieve the highest possible profit from their operations, by adjusting output levels, pricing, or resource usage.

Marginal Analysis

An examination of the benefits and costs of an additional unit of change in economic decisions.

Marginal Benefit

The added gratification or usefulness that an individual acquires from the consumption of an additional unit of a good or service.