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:

Laffer Curve

A theoretical representation showing the relationship between tax rates and the amount of tax revenue collected by governments.

Marginal Tax Rates

The percentage of tax applied to your income for each tax bracket in which you qualify, effectively the rate on the last dollar of income earned.

Tax Revenues

The income that is collected by governments through the imposition of various taxes, which is used to fund public services and policies.

Deadweight Losses

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved, leading to a net loss in societal welfare.