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Suppose a Firm Has a Debt-To-Equity Ratio (D/E) of 0

question 76

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Suppose a firm has a debt-to-equity ratio (D/E) of 0.5, return on assets of 18%, and return on debt of 12%. What will its return on equity be?


Definitions:

Self-Verification

The desire and tendency of individuals to seek confirmation of their self-concept, whether positive or negative, from their social environment.

Negative Views

Pessimistic or unfavorable opinions or beliefs about something or someone.

Effort Justification

A psychological phenomenon where individuals rationalize the effort they put into a task by increasing their valuation of the outcome.

Minimal Deterrence

A strategy in international relations aimed at preventing undesirable actions by other states, using the least force or threat possible.

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