Suppose There Is an Increase in Profitability

question 9

Multiple Choice

Suppose there is an increase in profitability.This suggests that

• A)firms have increased their expectations of future profits.
• B)the real interest rate has increased.
• C)the rate of depreciation has increased.
• D)all of the above

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Definitions:

Borrowing Cost

A financial expense encompassing interest and other costs incurred by an entity in connection with the borrowing of funds.

Entity's Profits

The financial gain that remains after subtracting all expenses, taxes, and costs from a company's revenue.

Residual Interest

The interest remaining in a trust or estate once all prior obligations, claims, or interests have been satisfied.