The favorable aspect of a high debt ratio is that higher leverage may result in

Question

The favorable aspect of a high debt ratio is that higher leverage may result in a lower return on equity. T/F

An income statement reports a firms revenues and expenses over a period; from the prior statement through this income statement date. T/F

Depreciation expenses is not included on the income statement because the amount is based on the depreciation method chosen by management and hence is not objectively determined. T/F

The balance sheet equation is Total Assets= Total Revenues - Total Liabilities. T/F

The owners of a corporation enjoy unlimited liability. T/F

Explanation / Answer

The favorable aspect of a high debt ratio is that higher leverage may result in a lower return on equity. True An income statement reports a firms revenues and expenses over a period; from the prior statement through this income statement date. True Depreciation expenses is not included on the income statement because the amount is based on the depreciation method chosen by management and hence is not objectively determined. False The balance sheet equation is Total Assets= Total Revenues - Total Liabilities. False The owners of a corporation enjoy unlimited liability. True

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