The Ability to Add Debt Financing to the Current Borrowing

question 88

True/False

The ability to add debt financing to the current borrowing of the firm and be able to make interest and principal repayments on time is known as the firm's debt-to-equity ratio.

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Definitions:

Margin of Safety

The difference between actual or expected sales and sales at the break-even point, indicating the risk margin for not reaching profit.

Dollars

The unit of currency used in the United States and other countries, represented by the symbol $.

Degree of Operating Leverage

The Degree of Operating Leverage is a measure that assesses the sensitivity of a company's operating income to changes in its sales volume, indicating the percentage change in operating income for a percentage change in sales.

Net Operating Income

A measure of a company's profitability from its regular business operations, deducting operating expenses from gross income.