Assuming There Is No Government or Foreign Sector, the Formula

question 112

Multiple Choice

Assuming there is no government or foreign sector, the formula for the multiplier is

• A) 1/(1 - MPC).
• B) 1/MPC.
• C) 1/(1 + MPC).
• D) 1 - MPC.

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Definitions:

Times Interest

A metric that evaluates a firm's capability to handle its debt responsibilities using its present earnings.

Equity Multiplier

A financial ratio that measures a company's use of debt financing by comparing total assets to shareholders' equity.

Working Capital

The difference between a company's current assets and current liabilities, indicating the available short-term assets to cover short-term debts.

Book Value

The value of an asset as recorded on the balance sheet, calculated as the cost of an asset minus accumulated depreciation.