Which of the Following Statements Is CORRECT

Multiple Choice

Which of the following statements is CORRECT?

A) Other things held constant,the less debt a firm uses,the lower its return on total assets will be.
B) The advantage of the basic earning power ratio (BEP) over the return on total assets for judging a company's operating efficiency is that the BEP does not reflect the effects of debt and taxes.
C) The return on common equity (ROE) is generally considered less significant,from a stockholder's viewpoint,than the return on total assets (ROA) .
D) The price/earnings (P/E) ratio tells us how much investors are willing to pay for a dollar of current earnings.In general,investors regard companies with higher P/E ratios as more risky and/or less likely to enjoy higher future growth.
E) Suppose you are analyzing two firms in the same industry.Firm A has a profit margin of 10% versus a margin of 8% for Firm B.Firm A's total debt to total capital ratio is 70% versus 20% for Firm B.Based only on these two facts,you cannot reach a conclusion as to which firm is better managed,because the difference in debt,not better management,could be the cause of Firm A's higher profit margin.