Firms That Have High Leverage Ratios Have a Lower Probability

question 52

True/False

Firms that have high leverage ratios have a lower probability of experiencing financial distress because they have a known fixed- interest expense to pay regardless of market conditions.

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Definitions:

Translating

The process of converting financial statements from one currency into another currency to provide comparability.

Subsidiary

A company that is completely or partly owned and partly or entirely controlled by another company.

Property, Plant & Equipment

This refers to tangible assets that are expected to be used in the production of goods or services and are not intended for sale in the ordinary course of business.

Current Rate Method

An accounting technique used to convert all foreign currency items into the reporting currency at the current exchange rate.