If a Firm's Debt Ratio Is Greater Than 0

question 1

Multiple Choice

If a firm's debt ratio is greater than 0.5,then:

• A) its current liabilities are quite high.
• B) its debt-equity ratio exceeds 1.0.
• C) it has too few total assets.
• D) it has more long-term debt than equity.

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Definitions:

Intra-entity Gross Profit

Profits arising from transactions within the same entity, requiring elimination during the consolidation process to avoid overstatement of revenues.

Consolidation Process

The method by which a parent company combines its financial statements with those of its subsidiaries to produce a single set of financial statements representing the entire group of companies.

Voting Common Stock

Shares that grant the shareholder the right to vote on corporate policies and board elections.

Equity Method

An accounting technique used by companies to assess the profits earned through their investment in other companies.