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1- Operating leverage is defined as:
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The use of debt capital instead of equity capital to fund the operations of a firm.
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Sales growing faster than operating cash flow on the cash flow statement.
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Sales growing faster than operating expenses allowing operating margins to expand.
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Operating cash flow growing faster than net income
2- If the inventory account rises on a balance sheet over the course of an accounting period it represents a(n):
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source of cash.
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impossible to determine without additional information.
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use of cash.
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neither a source or use of cash if the inventory was purchased on account
3- If a firm's debt ratio is greater than 100% and its net debt to EBITDA ratio is 1.0x, the firm is:
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probably over-leveraged.
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not necessarily over- or under-leveraged, but does need to raise equity capital.
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A debt ratio can never be over 100%.
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probably under-leveraged
4- Depreciation is defined as:
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The cost allocation method for some long-lived assets.
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A non-cash expense used to gauge how fast current assets are being depleted.
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A non-cash expense on the cash flow statement.
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The amount of assets that must be replenished every period
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