When Only Equity Counts as Capital, the Leverage Measure Is

question 4

Multiple Choice

When only equity counts as capital, the leverage measure is

• A)equal to the capital ratio.
• B)equal to return on assets.
• C)the inverse of return on assets.
• D)assets divided by equity.

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Definitions:

Inventory Loan

A secured short-term loan to purchase inventory.

Cash Disbursement

The payment of money from a fund or account, typically involving the transfer of cash to individuals or companies for services rendered or goods purchased.

Operating Cycle

The period from purchasing inventory to collecting cash from the sale of that inventory.

Accounts Receivable Financing

A type of financing arrangement in which a company uses its receivables as collateral for a loan, effectively selling its right to future payments in exchange for immediate cash.