Which of the following statements is CORRECT?
A. Other things held constant, the more debt a firm uses, the higher its operating margin will be.
B. Debt management ratios show the extent to which a firm's managers are attempting to magnify returns on owners' capital through the use of financial leverage.
C. Other things held constant, the more debt a firm uses, the higher its profit margin will be.
D. Other things held constant, the higher a firm's total debt to total capital ratio, the higher its TIE ratio will be.
E. Debt management ratios show the extent to which a firm's managers are attempting to reduce risk through the use of financial leverage. The higher the total debt to total capital ratio, the lower the risk.
Answer: B
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