What Are the Two Major Problems with Relying on the Measure

question 17

Multiple Choice

What are the two major problems with relying on the measure Capital gearing = Long- term debt/Shareholders' funds?

• A) It ignores the fact that many firms have no access to overdrafts or similar borrowing.
• B) The book value of assets can be quite different from the sale value.
• C) A range of values from zero to infinity is possible and this makes inter- firm comparisons difficult.
• D) It exaggerates the effect of financial distress.

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Definitions:

Group Selection

A theory in evolution proposing that natural selection operates on groups, not just individuals, for the survival benefit of the group.

Forage

The act of searching for and exploiting food resources in the environment by animals.

Monogamy Hypothesis

The theory suggesting that monogamy is favored in certain environments as it enhances offspring survival through biparental care.

Haplodiploidy Hypothesis

A genetic mechanism explaining the evolved social behavior in certain species, where males are haploid and females are diploid.