Which of the Following Statements Is CORRECT

question 56

Multiple Choice

Which of the following statements is CORRECT?

• A) If two firms differ only in their use of debt⎯i.e., they have identical assets, sales, operating costs, and tax rates⎯but one firm has a higher debt ratio, the firm that uses more debt will have a higher profit margin on sales.
• B) If one firm has a higher debt ratio than another, we can be certain that the firm with the higher debt ratio will have the lower TIE ratio, as that ratio depends entirely on the amount of debt a firm uses.
• C) A firm's use of debt will have no effect on its profit margin on sales.
• D) If two firms differ only in their use of debt⎯i.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax rates⎯but one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales.
• E) The debt ratio as it is generally calculated makes an adjustment for the use of assets leased under operating leases, so the debt ratios of firms that lease different percentages of their assets are still comparable.

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Definitions:

Environmental-Mold Traits

Source traits that are learned from social and environmental interactions.

Learned Characteristics

Traits or skills that are not innate but have been acquired through experience or instruction.

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Describes the distinctive and characteristic ways of thinking, feeling, and behaving that make up an individual's personality.

Nature And Nurture

A debate involving whether human behavior is determined by the environment, or by a person's genes.