If the Debt/assets Ratio Increases, the Costs of Both Debt

question 49

True/False

If the debt/assets ratio increases, the costs of both debt and equity decrease.

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Definitions:

Rising Prices

A situation where the general level of prices for goods and services in an economy increases over a period of time.

LIFO Reserve

The difference between inventory reported using the Last-In, First-Out (LIFO) method and its value if the First-In, First-Out (FIFO) method were used, indicating the impact of inflation on inventory costs.

Internal Reporting

The process of preparing and presenting financial and operational information to management and other internal stakeholders to assist in decision-making and performance evaluation.

GAAP Reporting

The standard framework of guidelines for financial accounting that includes the details, complexities, and legalities of business and corporate accounting. GAAP stands for Generally Accepted Accounting Principles.