A Company Has Assets of $10 Million and Liabilities of $7

question 86

Multiple Choice

A company has assets of $10 million and liabilities of $7 million.Liabilities include $4 million in accounts payable,$2 million in long-term notes payable and $1 million in other non-current liabilities.If a financial web site uses long-term debt rather than total liabilities to calculate the company's debt-to-assets ratio,the web site will report a ratio of:

• A)0.4,which would correctly state financing risk.
• B)0.4,which would suggest more financing risk than it actually has.
• C)0.3,which would suggest less financing risk than it actually has.
• D)0.3,which would suggest more financing risk than it actually has.

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Definitions:

Ionic

Relating to or involving ions, typically describing chemical bonds formed through the electrostatic attraction between oppositely charged ions.

Coordinate Covalent

A type of chemical bond where both electrons come from the same atom, typically seen in complex ions or molecules where a metal atom is bonded to one or more ligands.

Alkaline Earth Elements

A group of elements in the periodic table comprising beryllium, magnesium, calcium, strontium, barium, and radium, characterized by their two valence electrons.

Transition Metals

Elements found in the central block of the periodic table, characterized by their ability to form variable oxidation states and to create colored compounds.