Answered: High degree of financial leverage means…

High degree of financial leverage means Oa High debt proportion Ob Lower dobt proportion O. C.Equal debt and equity. Od. No debt

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 20MC: The difference between equity financing and debt financing is that A. equity financing involves...

See similar textbooks

Related questions

Q: creditor mostly interested in а. Liquidity b. Efficiency С. Marketability d. Financial leverage

A: Creditors are the users of financial statement who analyses the company financial statement to…

Q: The return which the debt holders get is called Select one: a. Profit b. Dividend c. Earnings d.…

A: Answer : (d) Interest. Debts are the credits for the company and hence, provides return in the form…

Q: Give an example of a debt ratio?

A: Companies’ capital structure may contain debt and equity. It is not necessary for any company to…

Q: Is there a consequence for reported profit or loss if a particular financial instrument, for…

A: Equity Stock represents the ownership in the company. Equity shareholders have the residual claim on…

Q: A note of caution in interpreting the debt ratio is that ____________ (a) all debt decreases…

A: debt ratio is the ratio of total debt to total assets.

Q: computing the cost of debt, a tax adjustment is required t arrive at after-tax cost of debt. Why is…

A: Cost of Equity: It is the rate of return the company pays to the investor for investing in the…

Q: Debt will always have a cost basis. that is less than equity. OA. True OB. False

A: Debt - Debt is referred to as the amount of money that is borrowed by one party from another and is…

Q: Help. 14. Making a credit decision is based upon all of the following except which? a. character b.…

A: Note : As per the guidelines, only first question will be answered. Kindly post the remaining parts…

Q: 5. Which of the following incorrectly matches the classification of the debt investment with its…

A: The amortized cost means the accumulated portion of fixed asset expense or depreciation. One of the…

Q: Vhile computing the cost of equity using the formula, r = D1 +g, we do not make PO ny adjustment to…

A: Equity is ownership of the company and debt is external to company.

Q: dont provide AI solution ........ What is the formula for calculating the debt-to-equity ratio?…

A: The debt-to-equity ratio is a financial metric that compares a company's total debt to its total…

Q: Liquidity

A: A firm’s liquidity position plays a very important role in ensuring its survival in the market.

Q: Debt financing can enable the return on assets to be greater than the return on equity True False…

A: Debt financing can increase the return on equity (ROE) but it does not typically enable the return…

Q: How does the cost of equity based on internal funds differ from the cost of equity based on external…

A: Note: Since you have asked multiple questions, we will solve the first question for you. If you want…

Q: An alternative name for Bad Debt Expense is Select one: O A. Office Expense. OB. Interest Expense.…

A: The entity makes sales on account as well as sales on cash. The company makes sales on account to…

Q: Does net debt ratio provide useful information to the investor? Are the NonGAAP measures, ROCE and…

A: Investors are the resources who bring their capital to the company with an intention to earn the…

Q: What is the significance of a debt coverage ratio?

A: Debt service coverage ratio (DSCR) is one of the numerous financial proportions that moneylenders…

Q: Explain what a unsecured debt, subordinated debt, senior debt is? -is there risk in buying an…

A: Debt is the obligation that requires one party, the debtor to pay money to another party, the…

Q: Which of the following ratios is most useful in evaluating solvency? Multiple Choice Current ratio…

A: The ratio measures the company's financial performance and progress over time. It is the quantity…

Q: Define the concepts of Dept capacity and Unused debt capacity? and if unused debt capacity was…

A: Debt Capacity: In general terms, it is the amount of debt that a business can incur and repay it as…

Q: Entires for bad debt expense - direct write off method

A: Direct write off method is to be used when a business for invoice uncollectible

Q: The Debt to Equity ratio calculation measures Group of answer choices c. How much debt the company…

A: Debt-to-Equity Ratio refers to the relative proportion of debt and equity to finance the assets of…

Q: A gain or loss from debt restructuring should be A. treated as increase or decrease in Paid-in…

A: Earlier gain or loss from debt restructuring was transferred to capital reserve, but now gain or…

Q: Explains the effect of debt on profit margin and return on assets (ROA).

A: Profit margin is net income as a percentage of sales and Return on assets is Net income as a…

Q: Which one of the following is an advantage of the factoring of debtor accounts? Select one: a. The…

A: Debtor account factoring is a financial transaction in which a company sells its accounts…

Q: n equity/capital O D.

A: To find the correct option as,

Q: Explain or illustrate before-tax cost of debt and after-tax cost of debt. 5. What are the…

A: The equity source and debt source of financing is considered to be important in capital structure.…

Q: The higher the debt level, the greater the burden borne by ___________ and the cost of debt.

A: The cost of debt is the rate a company pays on its debt

Q: When total shareholders' equity has a negative balance, it is described in financial statement as O…

A: The shareholders' equity represents the total equity that belongs to the owners.

Q: What is the main difference between debt and equity

A: Debt basically refers to the liability that the organization take to run their business activities…

Q: Provie The Correct Answer with calculation

A: 1. Contribution Margin Ratio: The contribution margin ratio is a measure of the profitability of a…

Q: Which of the following is NOT a possible measure of debt capacity? Group of answer choices Debt…

A: Debt capacity represent the capacity to repay the debt from income sources.

Q: Which one is measurable debt burden? Select one: a. Varaiances b. Debt per capita c. None of the…

A: The correct option is b. Debt per capita

Q: Which of the following are the factors for the Fama-French model? 1. The excess market…

A: Fama fench model is advance method of capital assets price model in which there are more factors are…

Q: should we expect the flotation costs for debt to be significantly lower than those for equity

A: Flotation costs are the expenses incurred by a firm when it issues fresh stock. Flotation costs…

Q: RUE OR FALSE 1. Short-term assets can always be financed with short-term debt, and long-term assets…

A: Short-term assets can always be financed with short-term debt, and long-term assets can be financed…

Q: True or False: Borrowing money and repaying debt results in changes in Net Worth. Celect one: - True…

A: Net worth means the amount that belong to the owner of the businessmen. It include the amount…

Question

High degree of financial leverage means

Oa High debt proportion

Ob Lower dobt proportion

O. C.Equal debt and equity.

Od. No debt

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Debt will always have a cost basis that is less than equity. OA. True B. False
Lower financial leverage is related to the use of additional O a. Debt financing O b. Variable costs O c. Fixed costs O d. Equity financing
The return which the debt holders get is called Select one: O a. None O b. Dividend O c. Interest O d. Cost O e. Profit O f. Earnings
The return which the debt holders get is called Select one: a. Profit b. Dividend c. Earnings d. Interest e. Cost f. None
Debt financing can enable the return on assets to be greater than the return on equity True False uestion
Which of the following is not a potential source of financial leverage? Group of answer choices Accounts payable. Long-term debt. Interest payable. Common stock.
The cost of debt is a. interest. b. principal. c. equity. d. liquidity. e. c. and d.
Compared to junior unsecured debt, subordinated debt exhibits __________ credit risk, __________ yield, and __________ recovery rate. A. lower / lower / higher B. higher / higher / lower C. higher / lower / lower D. lower / higher / lower
which of the following is not an advantage of equity rather than debt financing a. lower cost b. lower risk of insolvency c. lower funding risks d. no legal liability to pay dividends e. no requirement to repay capital.
Which one is measurable debt burden?Select one:a. Varaiancesb. Debt per capitac. None of the other pointsd. Statistically
Debt investment are initially recorded at: Cost Cost plus accrued interest Fair value None of the above
Financial leverage is the gage of using the - in financial structure ---- --- Debts Loans O Both of above