As a Firm Increases Its Level of Debt Relative to Its

question 28

Multiple Choice

As a firm increases its level of debt relative to its level of equity, the firm is ________.

• A) increasing the fraction of its equity
• B) decreasing the fraction of its debt
• C) decreasing its leverage
• D) increasing its leverage

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Definitions:

UPA

The Uniform Partnership Act (UPA) is a set of laws adopted by many states in the U.S. to govern the operation of partnerships and the relationship between partners.

Partnership Assets

The resources and property owned by a partnership that are used for conducting its business activities.

Liabilities Priority

The order in which obligations or debts of a company or individual are to be paid if there are insufficient assets to pay all liabilities in full.

Fraudulent Act

refers to any deliberate deception intended to secure an unfair or unlawful gain, or to deprive a victim of a legal right.