Current Liabilities as of December 31,2012 Are the

question 36

Multiple Choice

Current liabilities as of December 31,2012 are the

• A) obligations which were incurred during 2012 in the normal course of operating the business.
• B) debts on the balance sheet that must be repaid or refinanced in 2013.
• C) debts related only to operating activities of the company.
• D) debts on December 31,2012 that are expected to be paid using current assets during 2013.

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Definitions:

Unlevered Firms

Companies that operate without the use of borrowed money or financial leverage.

M&M Proposition II

A theory proposing that the cost of equity for a leveraged firm increases linearly with its level of debt, holding the cost of debt constant.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and is used in calculating the weighted average cost of capital.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to gauge financial health and risk.