When a Firm Employs No Debt

question 60

Multiple Choice

When a firm employs no debt

• A) it has a financial leverage of one.
• B) it has a financial leverage of zero.
• C) its operating leverage is equal to its financial leverage.
• D) it will not be profitable.

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Definitions:

Note Receivable

A written promise that requires one party to pay a specified sum of money to another party on a set date or on demand.

Depositor's Account

A financial account held at a bank or financial institution, into which a depositor can deposit and withdraw money.

Debit Memorandum

A document issued by a purchaser and sent to a seller indicating the amount and reasons for deductions in the payment or an increase in the purchaser's debt.

Bank Service Charge

A fee charged by a bank for the maintenance of an account or for processing transactions.