The Capital Structure Leverage Ratio Indicates

question 90

Multiple Choice

The capital structure leverage ratio indicates

• A)the sales generated from each dollar of assets.
• B)the portion of the sales dollar left over for the common shareholders after covering all operating costs and subtracting claims of creditors and preferred shareholders.
• C)the portion of the sales dollar left over for the preferred shareholders after covering all operating costs and subtracting claims of creditors and common shareholders.
• D)the proportion of total assets, or total financing, provided by common shareholders contrasted with the financing provided by creditors and preferred shareholders.
• E)the proportion of total assets, or total financing, provided by preferred shareholders contrasted with the financing provided by creditors and common shareholders.

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Definitions:

Break-even Point

The financial stage at which total revenues equal total expenses, indicating that a business is neither making a profit nor incurring a loss.

Variable Expenses

Costs that change in proportion to the level of activity or volume of production.

Sales

The transactions involving the exchange of goods or services for payment.

Net Operating Income

A measure of profitability that calculates the difference between a company's operating revenue and its operating expenses, excluding taxes and interest.