Which of the Following Statements Is TRUE

question 21

Multiple Choice

Which of the following statements is TRUE?

• A)The lower a firm's debt-to-equity ratio,the LESS room it has to take on additional debt.
• B)More stable industries,such as utilities,tend to have LOWER debt-to-equity ratios.
• C)Leverage ratios focus on INCOME STATEMENT items.
• D)There is NO GENERAL BENCHMARK FOR LEVERAGE RATIOS,and ideal values vary from industry to industry.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity and operational efficiency of the business.

Financial Data

Information related to the financial performance of a business, including income, expenses, assets, liabilities, and equity, used for analysis and decision-making.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Sales On Account

Transactions where goods or services are sold with the understanding that payment will be made at a later date, typically recorded as accounts receivable.