Leverage Differs from Profitability in That Leverage Measures

question 137

Multiple Choice

Leverage differs from profitability in that leverage measures:

• A) the ability to operate at minimum cost.
• B) the ability to meet short-term obligations.
• C) the ability to earn revenues greater than costs.
• D) the use of debt.
• E) asset and inventory efficiency.

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Definitions:

Arithmetic Average

The sum of a set of numbers divided by the count of that set of numbers, commonly used to compute simple averages.

Historical Annual Average

An average value calculated from a series of yearly figures, often used in financial analysis to smooth out fluctuations.

Holding-Period Return

Holding-period return is the total return received from holding an asset or portfolio of assets over a specified period, including interest, dividends, and capital gains.

Dividend

A portion of a company's earnings that is distributed to shareholders, usually in the form of cash or additional shares.