Which of the following scenarios would most likely increase financial leverage?
A company issues bonds to purchase treasury stock.
A company buys fixed assets with cash.
A company signs an operating lease agreement for a new manufacturing facility.
A company increases its dividend payout, making it in cash on the following payment date.
Bolton Company substantially increased its allowance for bad debt. Which of the following effects will occur?
Question 4 options:
Answers : -
3) The company issuing bonds to purchase treasury bills.
The more the debt of the company, the more the financial leverage.
4) It will reduce the current ratio.
Current ratio = Current Assets / Current liabilities. Increasing allowance for bad debts, the accounts payable will decrease which will result in decrease in Current Assets and decrease in Current ratio.
5) The stability and trend of earning require at least five years of historical data to be meaningful.
For stability and trend of earning of an organisation, the historical for previous 5 years data is required to evaluate the company's stability of earning and trend of earning.
6) All of the Bove statements are true.
Get Answers For Free
Most questions answered within 1 hours.