The Debt Ratio of Braun Is 0

question 160

Multiple Choice

The debt ratio of Braun is 0.9 and the debt ratio of Kemp is 1.0.Based on this information,an investor can conclude:

• A)Kemp finances a relatively lower portion of its assets with liabilities than Braun.
• B)Kemp has less financial leverage.
• C)Braun has higher financial leverage.
• D)Kemp has the exact same dollar amount of total liabilities and total assets.
• E)Braun has less equity per dollar of assets than Kemp.

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Definitions:

Credit Terms

The conditions under which a seller extends credit to a buyer, including the repayment period and any discount for early payment.

Inventory

The complete list of items such as goods, property, and raw materials a company holds for the purpose of resale or repair.

Credit Memo

A document issued by a seller to a buyer, reducing the amount owed by the buyer to the seller, typically due to a return or an overcharge.

Gross Profit

Revenue minus the cost of goods sold (COGS), representing the profit a company makes after deducting the costs associated with making and selling its products.