A Firm with No Leases Has a Long-Term Debt Ratio

question 58

Multiple Choice

A firm with no leases has a long-term debt ratio of 50%.This means that the book value of equity:

• A) equals the book value of long-term debt.
• B) is less than the book value of long-term debt.
• C) is greater than the book value of long-term debt.
• D) is unknown in relation to the book value of long-term debt.

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Definitions:

Unrealized Increase/Decrease

Refers to the increase or decrease in the value of an asset or investment that has not been sold.

Fair Value

An impartial estimate of the market value of an asset or liability, based on current market prices.

Available-for-Sale

A classification for financial assets that are not to be held to maturity or for trading purposes, allowing for changes in value to be recorded in other comprehensive income.

Unrealized Increase/Decrease

Unrealized increase/decrease refers to the changes in the value of investments that have not yet been sold and the gains or losses have not been 'realized' through a transaction.