If a Company's Total Liabilities Decrease,with Assets Unchanged,its

question 22

Multiple Choice

If a company's total liabilities decrease,with assets unchanged,its:

• A)net profit margin will increase.
• B)asset turnover ratio will increase.
• C)debt-to-assets ratio will decrease.
• D)debt-to-assets ratio will remain unchanged.

---

Definitions:

Security Market Line

The Security Market Line graphically represents the expected return of assets as a function of their systematic, non-diversifiable risk.

Risk-Adjusted Rate

A rate of return that has been adjusted to take into account the risk or volatility of the investment, providing a more accurate measure of its potential reward.

Risk Aversion

A preference to avoid uncertainty, characterized by investors' tendencies to prefer safer investments over more risky ones.

Portfolio Theory

A financial model that describes how to assemble a diversified portfolio to maximize returns and minimize risk based on expected returns and the variance of each asset.