A Firm with a Capital Structure with a Large Proportion

question 158

True/False

A firm with a capital structure with a large proportion of fixed costs will have a higher degree of operating leverage , while a company with a large amount of variable costs will have a lower degree of operating leverage.

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Definitions:

Comparative Balance Sheet

A comparative balance sheet presents the financial position of a company at two or more different points in time, allowing for analysis of trends and changes in assets, liabilities, and equity.

Horizontal Analysis

A financial analysis technique that compares line items in financial statements over a series of periods to identify trends and growth patterns.

Quick Ratio

The quick ratio, also known as the acid-test ratio, is a measure of a company's ability to meet its short-term obligations using its most liquid assets, excluding inventory.

Current Ratio

A financial ratio indicating how well a company can cover its short-term debts with assets that can be quickly converted into cash within a year.