If a Firm Uses Any Debt at All and If

question 94

Multiple Choice

If a firm uses any debt at all and if the firm generates positive earnings for common stockholders,then which of the following below is TRUE?

• A)ROE > ROA
• B)ROE < ROA
• C)ROE = ROA
• D)Gross profit margin < net profit margin

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Definitions:

Revised Article 3

Amendments and updates to Article 3 of the Uniform Commercial Code (UCC), which primarily deals with negotiable instruments like checks.

Accommodation Maker

An individual or entity that signs a negotiable instrument on behalf of another party, without receiving any benefit, to ensure that the instrument is accepted or paid.

Promissory Note

A financial document in which one party promises to pay another party a specific sum of money at a specified time or on demand.

Discharged

In a legal or financial context, it refers to being freed from a debt, obligation, or liability.