Question
Which of the following statements is (are) correct? If two firms pay the same interest rate on their debt and have the same rate of
Which of the following statements is (are) correct?
If two firms pay the same interest rate on their debt and have the same rate of return on assets, and if that ROA is positive, the firm with the higher debt ratio will also have a higher rate of return on common equity
One of the problems of ratio analysis is that the relationships are subject to manipulation. For example, we know that if we use some of our cash to pay off some of our current liabilities, the current ratio will always increase, especially if the current ratio is weak initially
Generally, firms with high-profit margins have high asset turnover ratios, and firms with low-profit margins have low turnover ratios; this result is exactly as predicted by the Du Pont equation
All of the above are correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started