Leverage Ratios Measure

question 95

Multiple Choice

Leverage ratios measure:

• A) The speed of changing assets into cash.
• B) The degree to which a firm relies on borrowed funds in its operations.
• C) How effectively a firm is using its various resources to achieve profits.
• D) How well a company converts its resources to profits.

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Definitions:

Net Present Value (NPV)

The calculation used to find today's value of a future stream of payments and receipts, factoring in the time value of money.

Option to Abandon

A strategic decision-making right allowing a company to cease investment in a project if operational costs outweigh the benefits.

Forecasting Error

The difference between the actual value and the predicted value in forecasting, indicating the accuracy of the prediction.

Capital Expenditure

Resources allocated by a corporation to purchase or improve tangible assets like land, factories, or machinery.