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maria [59]
3 years ago
11

Debt ratios measure the proportion of total assets financed by a firm’s creditors. Sunny Co. has a debt-to-equity ratio of 4.00,

compared to the industry average of 3.20. Its competitor Carter Co., however, has a debt-to-equity ratio of 6.00. Based on what debt-to-equity ratios imply, which of the following statements is true? Carter Co. has greater financial risk as compared to Sunny Co. and to the average financial risk in the industry. Sunny Co.’s shareholders expect magnified returns but higher risk as compared to Carter Co. Carter Co.’s creditors face lesser risk than the average financial risk in the industry. Carter Co. has higher creditworthiness as compared to Sunny Co.
Business
1 answer:
Varvara68 [4.7K]3 years ago
3 0

Answer:

Carter Co. has greater financial risk as compared to Sunny Co. and to the average financial risk in the industry.

Explanation:

Since the industry average is 3.20

Provided Debt to Equity is

Sunny Co. 4.00

Carter Co. 6.00

Since debt to equity represents the financial risk associated with the product.

It is clear that both the companies are on a higher financial risk than that of the industry.

Further the company is still in a better position than that of the competitor, as the later has higher debt to equity ratio.

Therefore, the first statement concluding that the financial risk of Carter Co. is highest of all including the competitor and the industry average is True.

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6 0
3 years ago
What is the LEAST LIKELY way a firm can finance operations?
drek231 [11]

Answer:

D

Explanation:

6 0
3 years ago
The following data were reported by a corporation: 20,000 15,000 3,000the number of outstanding shares is:
7nadin3 [17]

Outstanding shares will be 12,000 shares.

These are calculated as follows:

Here the number of shares are as follows;

Authorized shares are 20,000, Issued shares are 15,000, Treasury shares are 3,000

Therefore, the number of outstanding shares can be calculated as follows

Number of outstanding shares = Issued stock- Treasury stock

= 15,000-3,000

= 12,000

Hence the number of outstanding shares is 12,000

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8 0
2 years ago
Which of the following is typically considered a disadvantage of sole proprietorships? Multiple Choice Income taxes are paid by
matrenka [14]

Answer:

The answer is: Owner is personally liable for all debts of the business.

Explanation:

Sole proprietorship is the oldest type of business, where a single person is the owner of a business.

Some of the advantages of sole proprietorship are:

  • the simplest and most flexible business structure.
  • owner has complete control and full decision making powers
  • easy to close down the business
  • profits are taxed at the owner´s tax rate

Some of the disadvantages of sole proprietorship are :

  • owner is personally liable for all debts of the business .- if the business goes bankrupt, usually the owner does also
  • death or illness of the owner will lead to the end of the business.
  • difficulties in raising capital from outside sources
7 0
3 years ago
When it comes to decision making, in a limited partnership there is no separation of ownership and control limited partners have
kati45 [8]

Answer:

yes, there is no separation between the administration and ownership in a partnership.

the partnership contract stipulates which partners have the decision making ability and which partners don't. We cannot say specifically that limited partners have no say in decision making.

Moreover, the control of the partnership is not based on the amount invested like in corporations. that too is based on the contract. however, in practice, yes if you have more money invested in the business, you have more influence.

Explanation:

7 0
3 years ago
Read 2 more answers
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