Which of the Following Statements Is True Regarding Debt Ratios

question 70

Multiple Choice

Which of the following statements is true regarding debt ratios?

• A)Firms with relatively low debt ratios have higher expected returns when business is good.
• B)Firms with relatively low debt ratios are exposed to more risk compared to firms with relatively high debt ratios.
• C)Firms with relatively high debt ratios have higher expected returns when business is bad.
• D)Firms with relatively high debt ratios have higher expected returns when business is good.
• E)Firms with relatively low debt ratios have higher expected returns when business is poor.

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Definitions:

Conversion

The unauthorized act of taking someone else's property and converting it into one's own use, which infringes on the legal rights of the owner.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a specific sum of money either on demand or at a specified future date.

Cancellation

The act of declaring a contract or agreement null and void, thereby releasing the parties from their obligations under the contract.

Comparative Negligence

A legal doctrine that allocates the responsibility and damages in an accident proportionally to the degree of fault of each party involved.