If a Firm Has a Debt to Owners' Equity Ratio

question 213

Multiple Choice

If a firm has a debt to owners' equity ratio of .54 or 54%) we can conclude that:

• A)It has relied more on debt than equity to finance its operations.
• B)The firm is likely to have trouble paying its short term debts when they come due.
• C)Its total liabilities are less than its owners' equity.
• D)The firm has expenses that are exactly 54% of its gross profit.

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Definitions:

Shutting-Down

The process a business undergoes when it ceases operations, often due to financial struggles or strategic decisions.

Short Run

A period during which at least one factor of production is fixed, limiting the ability of a firm to adjust to changes in demand or production levels.

Average Costs

The total cost of production divided by the number of units produced, representing the cost per unit of production.

Shut-Down

The process of ceasing operations or closing a business temporarily or permanently.