Which Statement Concerning Liabilities Is Untrue

question 3

Multiple Choice

Which statement concerning liabilities is untrue?

• A) Borrowing to finance assets provides the potential for greater returns for owners but also means greater risk.
• B) The absolute value of liquidity ratios is usually more important than their trend over time.
• C) A difference between an accounts payable and a bills payable is that the liability created with a bills payable is evidenced by a bills payable or a promissory note.
• D) Leverage is the use of borrowed funds in an attempt to earn a return greater than the interest paid on the borrowings.

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Definitions:

Capital Goods

Long-term assets used by businesses to produce goods and services, such as machinery and buildings.

Consumer Goods

Items produced for direct consumption by the end consumer.

Production Possibilities Curve

An illustrative chart that depicts the optimal mix of two goods or services that can be produced by an economy when it fully and efficiently employs all available resources.

Society's Production

The total output of goods and services produced by all sectors within a society or economy.