What Is a Firm Doing If It Is Using Financial

question 23

Multiple Choice

What is a firm doing if it is using financial leverage?

• A)Marketable securities is part of its assets structure.
• B)It is using common stock as part of its capital structure.
• C)It is using debt or preferred stock as part of its capital structure.
• D)Accounts receivable is part of its asset structure.

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Definitions:

C

In the context of economic models, often stands for Consumption, which is a component of the GDP formula representing total spending by consumers on goods and services.

Gross Investment

The total amount spent on purchases of new capital assets and replacement of depreciated assets, not adjusted for depreciation.

Depreciation

Depreciation refers to the accounting method of allocating the cost of a tangible asset over its useful life, representing how much of an asset's value has been used up over time.

Gross Investment

The total amount of money invested in capital assets before accounting for depreciation, representing all new investment in the economy.