Which of the Following Would Increase the Likelihood That a Company

question 8

Multiple Choice

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

• A) An increase in the corporate tax rate.
• B) An increase in the personal tax rate.
• C) The Federal Reserve tightens interest rates in an effort to fight inflation.
• D) The company's stock price hits a new low.
• E) An increase in costs incurred when filing for bankruptcy.

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Definitions:

Historical Rate

The exchange rate used to convert foreign currency amounts involved in a transaction to the reporting currency based on the rate in effect at the time of the transaction.

Current-Rate Method

An accounting method used in translating the financial statements of a foreign subsidiary, where all current and non-current items are translated at the current exchange rate.

Functional Currency

The primary currency used by a business or entity in its daily operations.

South African Rand

The South African Rand is the official currency of South Africa, denoted by the symbol ZAR.