John Owns a Small Department Store That Issues Its Own

question 58

Multiple Choice

John owns a small department store that issues its own credit cards. He has been considering phasing out his own credit card and accepting only cash. If John chooses to do this he will be going from a position of risk _ to one of risk _.

• A) reduction; transfer
• B) avoidance; reduction
• C) assumption; avoidance
• D) assumption; transfer

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Definitions:

Total Debt

The sum of all short-term and long-term obligations owed by an entity, including bonds, loans, and other forms of financial liabilities.

Total Assets

The sum of all assets owned by an entity, including both current and non-current assets, representing what the entity owns outright.

Creditor's Point Of View

The perspective of a lender or anyone to whom money is owed, focusing on the borrower's ability to repay the debt and interest.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.