When a Higher Than Normal Ratio of Long-Term Debt to Net

question 35

Multiple Choice

When a higher than normal ratio of long-term debt to net worth is coupled with a lower than average ratio of profits to total assets,the company

• A)is highly successful.
• B)is comparable with industry standards.
• C)has a high risk of financial failure.
• D)has a liquidity problem.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms offering similar but not identical products, allowing for some degree of market power.

Oligopoly

The market structure that exists when there are very few businesses selling a product.

Economic Depression

A severe and prolonged downturn in economic activity characterized by significant decline in GDP, high unemployment, and deflation.