All of the Following Statements Regarding the Ratio of Liabilities

question 67

Multiple Choice

All of the following statements regarding the ratio of liabilities to owner's equity are true except:

• A) A ratio of 1 indicates that liabilities equal owner's equity.
• B) Corporations can use this ratio but substitute total stockholders' equity for total owner's equity.
• C) The higher this ratio is, 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:

Directional Alternative Hypothesis

Alternative hypothesis that indicates the direction of the change, difference, or relationship.

Non-directional Alternative Hypothesis

A hypothesis that predicts a change in the dependent variable but does not specify the direction of the change.

Non-directional Null Hypothesis

A hypothesis that specifies no expected direction of the observed effect, stating simply that there is no association between the variables under investigation.

Directional Null Hypothesis

A specific type of null hypothesis that posits no predicted direction of the effect or association between variables.