The Debt Ratio of Jackson's Shoes Is

question 64

Multiple Choice

The debt ratio of Jackson's Shoes is .9 and the debt ratio of Billy's Catering is 1.0. Based on this information, an investor can conclude:

• A) Billy's Catering has a lower risk from its financial leverage.
• B) Billy's Catering has the exact same dollar amount of total liabilities and total assets.
• C) Billy's Catering finances a relatively lower portion of its assets with liabilities than Jackson's Shoes.
• D) Jackson's Shoes has a higher risk from its financial leverage.
• E) Jackson's Shoes has less equity per dollar of assets than Billy's Catering.

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Definitions:

Economic Theory Approach

A perspective or method that applies economic theories and principles to analyze and solve various problems or to understand behavior.

Price Skimming

Price skimming involves setting a relatively high price for a new product or service at the beginning, then lowering the price over time.

Cost-Plus Approach

A pricing strategy where the selling price of a product is determined by adding a specific markup to its production cost.

Differential Income

The difference in income between two alternative decisions or scenarios.