Identify the Statement That Is Incorrect

question 166

Multiple Choice

Identify the statement that is incorrect.

• A)Higher financial leverage involves higher risk.
• B)Risk is higher if a company has more liabilities.
• C)Risk is higher if a company has higher assets.
• D)The debt ratio is one measure of financial risk.
• E)Lower financial leverage involves lower risk.

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Definitions:

Accumulated Depreciation

Accumulated depreciation represents the total depreciation expense assigned to a fixed asset over its useful life, reducing its book value.

Investments

Assets purchased with the expectation that they will generate income or appreciate in the future.

Owner's Equity

Refers to the residual interest in the assets of a company after deducting liabilities, representing the ownership interest.

Property Plant and Equipment

Durable physical assets that are utilized in running a business and are not meant to be sold.