Which One of the Following Correctly Reflects the Effects on the Financial

question 82

Multiple Choice

Which one of the following correctly reflects the effects on the financial statements caused by a decrease in the market price of long-term available-for-sale securities?

• A) Current ratio decreases.
• B) Earnings per share increases.
• C) Current ratio increases.
• D) Earnings per share remains unchanged.

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Definitions:

Redeeming Shares

The process of returning an investment by selling the shares back to the issuer for cash.

Debt Capital Structure

The composition of a company’s debt and equity capital, and the strategies used to finance its operations and growth. It often refers to the balance between the company's debt (liabilities) and equity (shareholder's equity).

Annual EBIT

Earnings Before Interest and Taxes calculated over a yearly period, indicating the profitability of a company before accounting for interest and tax expenses.

Homemade Leverage

The use of personal borrowing to change the overall amount of financial leverage to which the individual is exposed.