Identify the Statement That Is Incorrect

question 166

Multiple Choice

Identify the statement that is incorrect.

• A)Higher financial leverage involves higher risk.
• B)Risk is higher if a company has more liabilities.
• C)Risk is higher if a company has higher assets.
• D)The debt ratio is one measure of financial risk.
• E)Lower financial leverage involves lower risk.

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Definitions:

Vertical Analysis

An analysis that compares each item in a current statement with a total amount within the same statement.

Percentage Analysis

A financial analysis technique that expresses each item in a financial statement as a percentage of a base amount.

Horizontal Analysis

A financial analysis technique that compares historical financial information across different periods to identify trends and growth patterns.

Revenue Information

Data concerning the income generated from ordinary activities of a business, such as sales of goods or services, before any expenses are subtracted.