A Firm with No Leases Has a Long-Term Debt-Equity Ratio

question 43

Multiple Choice

A firm with no leases has a long-term debt-equity ratio of 50%.This means that the book value of equity:

• A)equals the book value of long-term debt.
• B)is less than the book value of long-term debt.
• C)is greater than the book value of long-term debt.
• D)is unknown in relation to the book value of long-term debt.

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Definitions:

Labor Rate Variance

The variance between the real labor costs and the projected or normative labor costs.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on output levels.

Direct Materials Purchases Variance

The difference between the actual cost of direct materials purchased and the expected cost, based on standard prices and quantities.

Standard Costs

Predetermined or estimated costs used for budgeting and measuring performance, typically under ideal operating conditions.