The Extent to Which a Firm Relies on Debt Is

question 184

Multiple Choice

The extent to which a firm relies on debt is referred to as:

• A) Homemade leverage.
• B) The target ratio.
• C) Business leverage.
• D) Proposition I.
• E) Financial leverage.

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Definitions:

Premium Prices

Prices that are higher than the average, often charged for goods and services considered to be of higher quality or uniqueness.

Accounts Receivable Turnover Calculation

A financial ratio that measures how efficiently a company collects revenue from its credit sales by dividing total net sales by the average accounts receivable during a period.

Credit Sales

Sales transactions where the customer is allowed to purchase goods or services on account, paying the seller at a later date.

Cash Sales

Transactions where goods or services are paid for and received at the time of sale, using cash or equivalent forms of payment.