When Only Equity Counts as Capital, the Higher the Capital

question 1

Multiple Choice

When only equity counts as capital, the higher the capital ratio, the

• A)lower the leverage measure.
• B)lower the degree of financial leverage.
• C)higher the leverage measure.
• D)lower the leverage measure AND lower the degree of financial leverage.
• E)lower the degree of financial leverage AND higher the leverage measure.

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Definitions:

End-of-Period Spreadsheet

A tool, typically in spreadsheet format, used at the end of an accounting period to compile adjustments and prepare financial statements.

Adjusted Trial Balance

A list of all the accounts and their balances after adjusting entries have been made, used to prepare financial statements.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent ones, thereby preparing the temporary accounts for the next accounting period.

Journalize

The act of recording transactions in a company's journal, which is the first step in the accounting cycle.