A Company Has a Debt-To-Assets Ratio of 0

question 152

Multiple Choice

A company has a debt-to-assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a correct statement?

• A)The debt-to-assets ratio will be unchanged.
• B)The debt-to-assets ratio will increase.
• C)The debt-to-assets ratio will decrease.
• D)The debt-to-assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.

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Definitions:

Actual Authority

The explicit power granted to an agent by a principal, allowing the agent to act on the principal's behalf.

Scope

The extent or range of view, work, or activity; the breadth of a project or operation.

Promoter

In a business context, a promoter is an individual or entity involved in organizing and starting a company, raising capital, and taking the necessary steps to establish it.

Unincorporated Business

A business structure without a separate legal entity from its owner, where the owner is personally responsible for the business's debts and obligations.