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141) Langley has a debt ratio of 0.3 and its competitor, Appleton, has a debt ratio equal to 0.7. Determine the statement below that is correct. A) Appleton finances a smaller percentage of its assets with liabilities as compared to Langley. B) Appleton's financial leverage is less than Langley's financial leverage. C) Appleton's financial leverage is greater than Langley's financial leverage. D) Langley has a higher risk from its financial leverage E) Higher financial leverage involves lower risk. Answer: C Difficulty: 2 Medium Topic: Debt Ratio Learning Objective: 02-A2 Compute the debt ratio and describe its use in analyzing financial condition. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Risk Analysis 142) Identify the statement that is incorrect. A) Higher financial leverage involves higher risk. B) Risk is higher if a company has more liabilities. C) Risk is higher if a company has more assets. D) The debt ratio is one measure of financial risk. E) Lower financial leverage involves lower risk. Answer: C Difficulty: 2 Medium Topic: Debt Ratio Learning Objective: 02-A2 Compute the debt ratio and describe its use in analyzing financial condition. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Risk Analysis

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Test Bank for Fundamental Accounting Principles 24th Edition Wild  

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