Which would be considered as the most favorable

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Problem 1: The following situations are descriptive of Integrity Corporation. Which would be considered as the most favorable for the common stockholders.

a. Equity ratio is high; return on assets exceeds the cost of borrowing.
b. Book value per share of common stock is substantially higher than market value per share; return on common stockholders' equity is less than the rate of interest paid to creditors.
c. Equity ratio is low; return on assets exceeds the cost of borrowing.
d. Integrity stops paying dividends on its cumulative preferred stock; the price-earnings ratio of common stock is low.

Reference no: EM132767446

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