If the Return on Total Assets Ratio Is Substantially Below

question 29

True/False

If the return on total assets ratio is substantially below the cost of borrowing,common stockholders will benefit from a high debt ratio.

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Definitions:

Social Security Tax

A tax that funds the Social Security program, collected from both employers and employees.

Medicare Tax

A federal tax that funds Medicare, the U.S. government's health care program for seniors and certain individuals with disabilities, withheld from an employee's paycheck.

Gross Pay

The total amount of money an employee earns before any deductions are taken out.

Net Pay

The amount of an employee's earnings after all deductions, such as taxes and retirement contributions, have been subtracted.