Which of the Following Statements Is CORRECT

question 11

Multiple Choice

Which of the following statements is CORRECT?

• A) Increasing its use of financial leverage is one way to increase a firm's return on investors' capital (ROIC).
• B) If a firm lowered its fixed costs but increased its variable costs by just enough to hold total costs at the present level of sales constant,this would increase its operating leverage.
• C) The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price.
• D) If a company were to issue debt and use the money to repurchase common stock,this would reduce its return on investors' capital (ROIC).(Assume that the repurchase has no impact on the company's operating income. )
• E) If a change in the bankruptcy code made bankruptcy less costly to corporations,this would tend to reduce corporations' debt ratios.

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Definitions:

Non-controlling Interest

A portion of equity ownership in a subsidiary not owned by the parent company, representing a minority interest's share in the subsidiary's net assets and earnings.

Consolidation Worksheet

A tool used by accountants to combine the financial statements of a parent company with its subsidiaries, leading to consolidated financial statements.

Intragroup Sales

Intragroup sales involve transactions of goods or services between companies within the same corporate group, impacting consolidated financial statements.

Non-controlling Interest

A shareholder's equity in a portion of a subsidiary that is not owned, directly or indirectly, by the company which owns more than half of the subsidiary.