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A Debt Ratio of 20 Percent Means That the Firm

question 49

True/False

A debt ratio of 20 percent means that the firm is relying more on borrowed money than owners' equity.


Definitions:

Closing the Revenue

The process of finalizing all revenue accounts and transferring their balances to permanent accounts at the end of an accounting period.

Capital Account

An account on the balance sheet representing the cumulative amount of investment in the business by the owners or shareholders, plus retained earnings.

Consent

Agreement or approval given freely and knowingly by a competent individual.

Interest

The cost of borrowing money, typically expressed as a percentage of the principal amount.

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