Mulberry Company Collected $7,000 from One of Its Customers,the Amount

question 19

Multiple Choice

Mulberry Company collected $7,000 from one of its customers,the amount owed from the previous month.How does this affect the accounting equation for Mulberry?

• A) assets increase by $7,000; liabilities decrease by $7,000
• B) assets increase by $7,000; assets decrease by $7,000
• C) assets increase by $7,000; liabilities increase by $7,000
• D) assets increase by $7,000; equity increases by $7,000

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Definitions:

Debt-To-Equity Ratio

The debt-to-equity ratio is a measure of financial leverage, indicating the proportion of company financing that comes from creditors and investors, calculated as total liabilities divided by shareholders' equity.

Cash Coverage Ratio

This ratio measures a company's ability to cover its interest obligations with its cash flow, indicating financial health and risk.

Times Interest Earned Ratio

A financial metric used to measure a company's ability to meet its debt obligations, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Debt-To-Equity Ratio

A ratio demonstrating the balance between shareholder equity and debt in funding a company's assets.