Which of the Following Ratios Give a Perspective on Risk

question 15

Multiple Choice

Which of the following ratios give a perspective on risk in the capital structure?

• A) Book value per share
• B) Price/earnings ratio
• C) Degree of financial leverage
• D) Dividend yield

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Definitions:

Book Value

The net value of a company's assets subtracted by its liabilities and preferred stock, indicating what remains for common shareholders according to accounting standards.

Market Value

The existing cost for buying or selling an asset or company in the market.

Taxable Income

The amount of an individual's or entity's income used to determine how much tax is owed, calculated by deducting allowable deductions and exemptions from gross income.

Tangible Asset

Physical and material assets that can be seen, touched, or quantified, such as machinery, buildings, and inventory.