Which of the Following Statements Is Correct

question 90

Multiple Choice

Which of the following statements is correct?

• A) If two firms pay the same interest rate on their debt and have the same rate of return on assets,and if that ROA is positive,the firm with the higher debt ratio will also have a higher rate of return on common equity.
• B) One of the problems of ratio analysis is that the relationships are subject to manipulation.For example,we know that if we use some of our cash to pay off some of our current liabilities,the current ratio will always increase,especially if the current ratio is weak initially.
• C) Generally,firms with high profit margins have high asset turnover ratios,and firms with low profit margins have low turnover ratios;this result is exactly as predicted by the Du Pont equation.
• D) Firms A and B have identical earnings and identical dividend payout ratios.If Firm A's growth rate is higher than that of Firm B,Firm A's P/E ratio must be greater than Firm B's P/E ratio.
• E) None of the above statements is correct.

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Definitions:

Defensive Self-esteem

A form of self-esteem characterized by a fragile sense of self that can easily be threatened and may lead to defensive or aggressive reactions.

Low Self-efficacy

The belief in one's inability to execute behaviors necessary to produce specific performance attainments.

Self-serving Bias

The common habit of a person taking credit for positive events or outcomes but blaming outside factors for negative events.

Defensive Self-esteem

A form of self-esteem characterized by fragility and sensitivity to perceived threats, often leading individuals to react defensively to criticism or challenges.