Zoey Was Asked by the Company Controller to Determine If

question 199

Multiple Choice

Zoey was asked by the company controller to determine if the company could borrow more money for an expansion project.When she calculated a leverage ratio,she determined that the company already had 1.5 times as much debt as equity.Do you agree with her assessment that the company should back off with borrowing more funds at this time?

• A) Yes,but if the company would increase sales,it could go ahead with borrowing more funds.
• B) Not necessarily.She should investigate the debt to equity ratios of other firms in the same industry.
• C) Yes,but the firm should pursue equity investment until the ratio equals 1:1.
• D) Not necessarily.In poor economic times,it is good financial strategy for a firm to be highly leverageD.

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Definitions:

Pregnancy Discrimination

Unfair treatment of a woman in the workplace due to her pregnancy, affecting her job security, opportunities, and income.

EEOC

Equal Employment Opportunity Commission, a federal agency that enforces laws against workplace discrimination in the United States.

Annual Leave

Paid time off granted by employers to employees to be used for personal reasons throughout the year.

Commuter Marriages

Marriages in which the spouses live apart in different geographical locations due to their work commitments, leading to periodic commuting.