Which of the following statements is CORRECT?
A) The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the
Inventory turnover ratio.
B) If two firms have the same ROA, the firm with the most debt can be
Expected to have the lower ROE.
C) An increase in the DSO, other things held constant, could be
Expected to increase the total assets turnover ratio.
D) An increase in the DSO, other things held constant, could be
Expected to increase the ROE.
E) An increase in a firm's debt ratio, with no changes in its sales or
Operating costs, could be expected to lower the profit margin.

Question

Quizplus · Accepted Answer

An increase in a firm's debt ratio, with no changes in its sales or operating costs, could lead to higher interest expenses, which would reduce net income and thus lower the profit margin.

Which of the Following Statements Is CORRECT