Which Statement Is Correct About the Financial Leverage of a Company

question 10

Multiple Choice

Which statement is correct about the financial leverage of a company with an equity base of $400,000?

• A)A company that borrows $150,000 is more leveraged than a company that borrows $250,000.
• B)A company that borrows $250,000 is more leveraged than a company that borrows $150,000.
• C)The return on equity of the company is unaffected by the financial leverage.
• D)The return on equity of the company will be higher if it has a lower leverage.

Understand the process and implications of liquidating a partnership, including the distribution of cash and handling of deficit capital account balances.

Identify the rights of personal creditors during the liquidation of a partner’s interest, especially when a partner is insolvent.

Describe the procedures for recording gains or losses from the liquidation of partnership assets.

Explain the significance and preparation of a preliminary distribution plan in partnership liquidation.

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