Which of the Following Statements Is True for Leverage

question 15

Multiple Choice

Which of the following statements is true for leverage?

• A)Assets turnover ratio measures financial leverage.
• B)Leverage always increases profitability.
• C)Leverage is shown in proportion of total assets relative to total equity.
• D)Higher the debt ratio, higher the leverage.

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Definitions:

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which sales can fall before a business incurs a loss.

Break-Even Point

The level of sales or production at which total revenues equal total expenses, resulting in no profit or loss for the business.

Sales

The total amount of goods or services sold by a company within a specific period, generating revenue.

Standard Bikes

Refers to bicycles that adhere to specific industry norms and standards, typically meant for average or typical use scenarios.