If a Company Negotiates a Deal with Creditors to Exchange

question 136

Multiple Choice

If a company negotiates a deal with creditors to exchange debt for stock,its:

• A)net profit margin ratio will increase.
• B)asset turnover ratio will increase.
• C)debt-to-assets ratio will decrease.
• D)debt-to-assets ratio will remain unchanged.

---

Definitions:

Break-Even Point

The production level at which total revenues equal total expenses, resulting in neither a profit nor a loss.

AVC

Average Variable Cost, the total variable cost divided by the quantity of output produced, representing the variable cost of producing each unit.

Shutdown Point

The level of operation at which a company does not generate enough revenue to cover its variable costs, leading to a decision to cease operations temporarily.

Short-Run Supply Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity that producers are willing to supply in the short term, typically illustrating an upward slope.