Answer the following statements true (T) or false (F)
1. The debt ratio is calculated by dividing total assets by total liabilities.
2. A company that finances a relatively large portion of its assets with liabilities is said to have
a high degree of financial leverage.
3. If a company is highly leveraged, this means that it has relatively high risk of not being able
to repay its debt.
4. Booth Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio
is 40.0%.
5. A journal entry that affects no more than two accounts is called a compound entry.
1. FALSE
2. TRUE
3. TRUE
4. FALSE
5. FALSE
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The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.
A) cash conversion cycle B) cash ratio C) gross profit D) debt equity ratio
Which of the following is likely to be a breach of a corporate officer's/director's duty of care?
A) Failing to make a reasonable investigation of relevant facts B) Failing to anticipate a drop in the consumer demand of the company's product C) Failing to foresee a severe rise in the interest rate D) Failing to predict the startup of a new competitor E) All of the above
A firm can handle predictable variability by managing
A) supply using capacity, inventory, trade promotions, and backlogs. B) supply using capacity, inventory, subcontracting, and backlogs. C) demand using short-term price discounts and trade promotions. D) B and C only
In a contract that provides that the sale is F.O.B. Chicago, the seller must at his own expense and risk transport the goods to Chicago and there tender delivery to the buyer
Indicate whether the statement is true or false