If a Firm Has an Exceptionally Good Year and Grows

question 16

Multiple Choice

If a firm has an exceptionally good year and grows as a result, then

• A)the debt-equity ratio of the firm will increase.
• B)the debt ratio of the firm will increase.
• C)the equity of the firm will increase.
• D)both A and B.

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Definitions:

Promissory Note

A financial document in which one entity guarantees to pay a certain amount of money to another, either when asked or at an agreed-upon date in the future.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Canadian Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, calculated by Statistics Canada.

Annual Rate of Inflation

The percentage increase in the cost of goods and services over a one-year period.