Operating Ratios Measure the Extent to Which an Entrepreneur Relies

question 5

True/False

Operating ratios measure the extent to which an entrepreneur relies on debt capital rather than equity capital to finance the business.

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Definitions:

Noncumulative

A type of preferred stock on which dividend payments are not accumulated if they are not declared.

Nonparticipating

In the context of financial securities, refers to preferred shares or other financial instruments that do not have the right to share in the corporation's earnings beyond a certain amount.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Stock Dividend

A dividend payment made in the form of additional shares rather than cash, increasing the number of shares owned by shareholders.