If Company a Has a Debt-To-Assets Ratio of 0

question 115

Multiple Choice

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

• A)Stockholders own a smaller proportion of Company A than Company B.
• B)Company A must make less profit than Company B.
• C)Creditors own a smaller proportion of Company A than Company B.
• D)Company A must have fewer assets than Company B.

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Definitions:

General Factory

A term generally referring to the main production site where various goods are manufactured.

Activity-Based Costing

A method of accounting that recognizes and allocates expenses to overhead operations, before distributing those expenses to the products.

General Factory

Expenses related to the general operation of a manufacturing plant, not directly tied to specific units of production.

Activity-Based Costing

A costing method that assigns costs to products based on the activities needed to produce those products, aiming to provide more accurate product costing.