Use the table for the question(s)below.
Statement of Financial Position

-If the above statement of financial position is for a retail company,what indications about this company would best be drawn from the changes in leverage between 2014 and 2015?
A)The company's risk has decreased.
B)The company's risk is unchanged.
C)The company may have a problem in meeting borrowing obligations in the future.
D)The company has excellent growth prospects.
E)The company is bankrupt.

Question

Use the table for the question(s)below.
Statement of Financial Position
 
-If the above statement of financial position is for a retail company,what indications about this company would best be drawn from the changes in leverage between 2014 and 2015?
A)The company's risk has decreased. 
B)The company's risk is unchanged. 
C)The company may have a problem in meeting borrowing obligations in the future. 
D)The company has excellent growth prospects. 
E)The company is bankrupt.

Quizplus · Accepted Answer

Changes in leverage, such as an increase in debt relative to equity, can indicate a higher risk of the company facing difficulties in meeting its borrowing obligations in the future. This is because increased leverage means more debt, which the company must service and eventually repay, potentially straining its financial resources.

Use the Table for the Question(s)below