From a Creditor's Point of View, the Higher the Debt

question 2

True/False

From a creditor's point of view, the higher the debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.

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Definitions:

Cash Discounts

Reductions in the price of goods or services offered to customers as an incentive for early payment.

Sales Returns

Transactions where the buyer returns previously purchased merchandise back to the seller for a refund or exchange, reducing the seller's revenue.

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts.

Recording

The act of documenting financial transactions in accounting records.