Which of the Following Statements Is Correct

question 79

Multiple Choice

Which of the following statements is correct?

• A) If Company A has a higher debt ratio than Company B,then we can be sure that A will have a lower times-interest-earned ratio than B.
• B) Suppose two companies have identical operations in terms of sales,cost of goods sold,interest rate on debt,and assets.However,Company A uses more debt than Company B;that is,Company A has a higher debt ratio.Under these conditions,we would expect B's profit margin to be higher than A's.
• C) The ROE of any company which is earning positive profits and which has a positive net worth (or common equity)must exceed the company's ROA.
• D) Statements a,b,and c are all true.
• E) Statements a,b,and c are all false.

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Definitions:

Small Investors

Individuals who commit capital to investments in smaller amounts compared to institutional investors, often with less access to sophisticated tools and information.

Par Value

The face value of a bond or the stated value of a stock, not necessarily its market value.

Common Stock

Equity security representing ownership in a corporation, providing voting rights and a share in profits through dividends.

Paid in Excess

Funds received by a company over and above the par value of its stock, often recorded as additional paid-in capital on the balance sheet.