Lu Lu's Catering Has a Debt Ratio Equal to

question 200

Multiple Choice

Lu Lu's Catering has a debt ratio equal to .3 and its competitor,Able's Bakery,has a debt ratio equal to .7.Determine the statement below that is correct.

• A)Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's.
• B)Able's Bakery's financial leverage is less than Lu Lu's.
• C)Able's Bakery's financial leverage is greater than Lu Lu's.
• D)Lu Lu's has a higher risk from its financial leverage.
• E)Higher financial leverage involves lower risk.

---

Definitions:

Spending Variance

The difference between the actual amount of money spent and the budgeted amount, often analyzed in cost management.

Customers Served

The total number of customers who receive service or goods from a company within a specified period.

Fixed and Variable Cost

Costs that remain constant regardless of the level of production or sales (fixed) and costs that change in proportion to the level of production or sales (variable).

Total Expenses

The sum of all costs and expenses incurred by a business, including cost of goods sold and operational expenses.