Small Businesses with High Leverage Ratios Are Less Vulnerable to Economic

question 80

True/False

Small businesses with high leverage ratios are less vulnerable to economic downturns,but they have a lower potential for large profits.

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Definitions:

Payback

A method to evaluate investments by calculating the time needed to recoup the original investment.

Discount Factor

A multiplier used in time value of money calculations to determine the present value of a future sum or cash flow.

Straight-Line

A method of calculating depreciation of an asset, whereby its cost is evenly spread over its useful life.

Cash Payback Period

The time it takes for a business to recover its investment in a project solely from cash flows, used to assess the risk or attractiveness of an investment.