Which of the Following Statements Is False When Describing the Debt

question 88

Multiple Choice

Which of the following statements is false when describing the debt ratio?

• A)It is of use to both internal and external users of accounting information
• B)A relatively high ratio is desirable
• C)The dividing line between a high and low ratio varies from industry to industry
• D)Many factors such as company's age,stability,profitability,and cash flow influence the determination of what would be interpreted as a high versus a low ratio
• E)The ratio might be used to help determine if a company could be capable of increasing its income by going into further debt

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Definitions:

Total Revenue

The aggregate revenue a corporation generates from sales or services in a given time frame.

Economic Profits

The profit a company makes after accounting for both the explicit costs of production and the opportunity costs of capital.

Long Run

A period in which all factors of production and costs are variable, typically allowing for full adjustment to changes.

Market Equilibrium

A situation in which the quantity of goods or services supplied is equal to the quantity demanded, leading to no pressure for price to change.