A Firm Is Considering Actions Which Will Raise Its Debt

Multiple Choice

A firm is considering actions which will raise its debt ratio. It is anticipated that these actions will have no effect on sales, operating income, or on the firm's total assets. If the firm does increase its debt ratio, which of the following will occur?

A) Return on assets will increase.
B) Basic earning power will decrease.
C) Times interest earned will increase.
D) Profit margin will decrease.
E) Total assets turnover will increase.