The Higher the Degree of Financial Leverage Employed by a Firm,the

question 44

Multiple Choice

The higher the degree of financial leverage employed by a firm,the:

• A)higher the probability that the firm will encounter financial distress.
• B)lower the amount of debt incurred.
• C)less debt a firm has per dollar of total assets.
• D)higher the number of outstanding shares of stock.
• E)lower the balance in accounts payable.

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Definitions:

Statement of Income

A financial report summarizing the revenues, expenses, and profits/losses of a company over a specified period, also known as an income statement.

Adjusted Trial Balance

A list of all accounts and their balances after adjusting entries have been made, used to prepare financial statements.

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid by the company, often recorded as a liability on the balance sheet.

Services Paid

Expenses related to services that have been paid for by a company or individual.