Lu Lu's Catering Has a Debt Ratio Equal to

question 37

Multiple Choice

Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct.

• A) Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's.
• B) Higher financial leverage involves lower risk.
• C) Able's Bakery's financial leverage is greater than Lu Lu's.
• D) Able's Bakery's financial leverage is less than Lu Lu's.
• E) Lu Lu's has a higher risk from its financial leverage.

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