Leverage

question 45

Multiple Choice

Leverage:

• A)is a dangerous tool,especially for big companies who do not understand its risk.
• B)has been outlawed since 2010.
• C)is often cited as the single reason for the Great Recession of 2008.
• D)All of these statements are true.

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Definitions:

Operating Cycle

The duration of time it takes for a company to buy inventory, sell the goods, and collect the receivables from the sale.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Cash Collections

Cash collections refer to the process of gathering all cash generated from sales, services, or receivables by a business during a specific period.

Minimum Cash Balance

Minimum cash balance is the lowest amount of cash a company aims to maintain in its accounts to ensure operational liquidity.