The Elements of Financial Statements Include Investments by Owners

question 88

Multiple Choice

The elements of financial statements include investments by owners. These are increases in an entity's net assets resulting from owners'

• A) transfers of assets to the entity.
• B) rendering services to the entity.
• C) satisfaction of liabilities of the entity.
• D) All of these answer choices are correct.

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Definitions:

Operating Leverage

A gauge of the relationship between sales growth and the growth of operational earnings, showing the mix of fixed and variable costs within a business.

Financial Leverage

The use of borrowed funds to finance investments, aiming to increase the potential return to equity holders.

Business Risk

The exposure a company or investor faces from uncertainties that may impact its operations and profitability.

Financial Risk

The possibility of losing money or financial assets due to factors affecting financial markets, investment decisions, or company performance.