Figure 24-1 -Refer to Figure 24-1.Ceteris Paribus,an Increase in Personal Income Taxes

question 285

Multiple Choice

Figure 24-1
-Refer to Figure 24-1.Ceteris paribus,an increase in personal income taxes would be represented by a movement from

• A)AD1 to AD2.
• B)AD2 to AD1.
• C)point A to point B.
• D)point B to point A.

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Definitions:

Sensitivity of EPS

The degree to which a company's earnings per share (EPS) is affected by fluctuations in its operating income.

ROE

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Target Capital Structure

The optimal mix of debt, preferred stock, and common equity that a company aims to maintain for financing its operations.

Debt-equity Ratio

A gauge of how shareholders' equity and debt proportionately finance a company’s assets.