Zoey Was Asked by the Company Controller to Determine If

question 350

Multiple Choice

Zoey was asked by the company controller to determine if the company could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time?

• A) Yes, but if the company would increase sales, it could go ahead with borrowing more funds.
• B) Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry.
• C) Yes, but the firm should pursue equity investment until the ratio equals 1:1.
• D) Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged.

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Definitions:

Testosterone Level

The concentration of testosterone, a steroid hormone responsible for the development of male secondary sexual characteristics, in the bloodstream.

Neurotransmitters

Chemicals in the nervous system that transmit signals across a synapse from one neuron to another, playing a key role in managing bodily and mental functions.

Personality

Personality encompasses the set of emotional, attitudinal, and behavioral response patterns of an individual.

2D:4D Ratio

The length of someone’s index finger divided by the length of their ring (third) finger; a low ratio is linked to a high testosterone level.