A Decrease in the Ratio of Liabilities to Stockholders' Equity

question 43

True/False

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

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Definitions:

Capital Expenditures Budget

A budget allocation for the planned spending on long-term assets, such as buildings, machinery, and equipment, intending to enhance the capacity or efficiency of the business.

Top-Down Managerial Approach

This approach in management involves decision-making and directive processes originating from the upper echelons of the organization hierarchy and flowing downward.

Budget Preparation

The process of estimating future financial performance and resource requirements, forming the basis of a financial plan.

Sales Budget

An estimate of the expected total sales revenue and the necessary selling expenses for a specific period, often broken down by product line or category.