When a fiRm Initially Acquires Debt to Help fiNance Its

question 263

Multiple Choice

When a firm initially acquires debt to help finance its operations, it is said that the firm is:

• A) Increasing its liquidity.
• B) Increasing its marketability.
• C) Increasing its operating cash flows.
• D) Spending its cash flow from assets.
• E) Employing financial leverage.

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Definitions:

Equivalent Unit

A concept in cost accounting used to compute the cost of partially completed goods, translating them into a number of fully completed units.

Assembly Department

A section of a manufacturing company where components are assembled into final products.

Costs Per Unit

The total expense involved in manufacturing or acquiring a product divided by the number of units.

Step-Down Method

An allocation method used in cost accounting to assign overhead costs to products or departments, incorporating inter-departmental services.