Which of the Following Transactions Will Lower a Company's Financial

question 105

Multiple Choice

Which of the following transactions will lower a company's financial leverage?

• A) A mortgage loan is obtained and the proceeds are used to pay off existing short-term debt.
• B) Preferred stock is sold and the proceeds are used to pay off existing short-term debt.
• C) Common stock is sold and the proceeds are used to pay off existing short-term debt.
• D) Short-term debt is obtained to get the company through a period of negative net income and cash flow.

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate insights into the actual costs of production or services.

Machine-Hours

A measure of production time in hours by machines, used as a basis for allocating manufacturing overhead in cost accounting.

Activity Rate

The cost driver rate used in activity-based costing to allocate costs to products or services based on the activities required for their production or delivery.

Materials Handling

The process of moving, protecting, storing, and controlling materials and products in any form throughout the manufacturing and distribution process.