Graph 7-2 -Refer to Graph 7-2. When the Price Rises from P₁

question 108

Multiple Choice

Graph 7-2

-Refer to Graph 7-2. When the price rises from P₁ to P₂, which of the following is NOT true?

• A) the buyers who still buy the good are worse off because they now pay more
• B) some buyers leave the market because they are not willing to buy the good at the higher price
• C) the total value of what is now purchased by buyers is actually higher
• D) consumer surplus in the market falls

Identify the conditions and consequences associated with term loans, including restrictive covenants.

Understand the advantages and risks associated with leasing and sale-leaseback arrangements.

Differentiate between different loan and financing structures and their suitability for various business needs.

Recognize the implications of financial decisions on business relationships and creditworthiness.

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Definitions:

Financial Risk

The chance of experiencing financial loss from an investment or enterprise because of different economic elements.

ROA

Return on Assets is a measure of how effectively a company uses its assets to generate profit, calculated as net income divided by total assets.

ROE

Return On Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.

Financial Leverage

The use of borrowed funds to increase a company's investment potential, which can amplify both potential returns and potential losses.