All of the Following Statements Regarding the Ratio of Liabilities

question 20

Multiple Choice

All of the following statements regarding the ratio of liabilities to stockholders' equity are true except

• A) A ratio of 1 indicates that liabilities equal stockholders' equity.
• B) The ratio is calculated as total liabilities divided by total stockholders' equity.
• C) The higher this ratio, the better able a business is to withstand poor business conditions and pay creditors.
• D) The lower this ratio is, the better able a business is to withstand poor business conditions and pay creditors.

---

Definitions:

Democratic Leadership

A leadership style in which the leader makes decisions based on the input of each team member, encouraging group participation and delegating tasks.

Crisis Situations

Emergency or pivotal moments requiring immediate and effective responses to avoid or mitigate disasters.

Bureaucratic Inertia

The tendency of bureaucratic organizations to resist change and continue with current practices, even in the face of new challenges or opportunities.

Decentralized Decision Making

A system or process where decision making is distributed or delegated away from a central authority, allowing for more local or individual control.