Selected Financial Data for Rescue Rooter Are Presented Below -Refer to the Figure Rescue Rooter

question 142

Multiple Choice

Selected financial data for Rescue Rooter are presented below:
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total liabilities } & \$ 1,205,000 & \$ 952,000 \\\text { Common shares } & 250,000 & 225,000 \\\text { Paid-in capital in excess of par - common shares } & 150,000 & 135,000 \\\text { Retained earnings } & 155,000 & 145,000\end{array}$
-Refer to the figure Rescue Rooter.What does the Rescue Rooter's debt-to-equity ratio for Year 2 indicate?

• A) It is increasing, which may be a cause of concern for the company.
• B) It is increasing, which is always a good sign from the viewpoint of investors.
• C) It is decreasing, which may be a cause of concern for the company.
• D) It is decreasing, which is always a good sign from the viewpoint of investors.

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Definitions:

Mean

The average value obtained by adding all the data points in a set together and then dividing by the number of data points.

Standard Normal Curve

A symmetric bell-shaped curve that represents the distribution of many types of data where the mean is 0 and the standard deviation is 1.

Z-score

An index quantifying the position of a value relative to the average value in a dataset, expressed as the amount of standard deviations away from this mean.

Percentile

A value below which a given percentage of observations in a group of observations falls, used to understand and interpret data distributions.