At Sips and Chips, a Local Cybercafé, a Financial Manager

question 13

Multiple Choice

At Sips and Chips, a local cybercafé, a financial manager has calculated the debt-to-equity ratio and discovered it is equal to one. What does this indicate about Sips and Chips?

• A) It is relying exclusively on debt financing to meet its long-term financing needs.
• B) It is relying on equal amounts of debt and equity financing.
• C) It has an equal amount of current assets and current liabilities.
• D) It is at risk of being unable to pay its short-term debts when they come due.

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Definitions:

Quitclaim Deeds

Legal documents used to transfer a claim, interest, or right in property from one party to another without any assurance of the validity of the grantor's claim.

Technical Defects

Flaws or imperfections in a product that affect its operation, often due to errors in manufacturing or design.

Chain of Title

A historical record of all previous owners and transfers of a piece of property.

General Warranty Deed

A type of deed that provides the highest level of protection for the buyer, guaranteeing the property is free from all claims and liens.