Which of the Following Statements Is CORRECT

question 11

Multiple Choice

Which of the following statements is CORRECT?

• A) An increase in a firm's debt ratio, with no changes in its sales or operating costs, could be expected to lower the profit margin.
• B) The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the inventory turnover ratio.
• C) If two firms have the same ROA, the firm with the most debt can be expected to have the lower ROE.
• D) An increase in the DSO, other things held constant, could be expected to increase the total assets turnover ratio.
• E) An increase in the DSO, other things held constant, could be expected to increase the ROE.

---

Definitions:

Recognized

Refers to the formal acknowledgment in financial accounting of particular transactions and events in the financial statements.

Definition Of An Element

In accounting, an element refers to the essential categories into which all financial transactions can be classified, such as assets, liabilities, equity, revenue, and expenses.

Financial Flexibility

The ability of an entity to adapt to unforeseen expenses or investment opportunities without significant stress.

Resources

Assets, both tangible and intangible, that are owned or controlled by a business and can produce value.