2. The concept of leverage is that

a.a high debt-to-equity ratio is favorable.

b.it is appropriate to borrow as long as the lender approves the loan.

c.it is unfavorable to borrow funds rather than raise the capital from stockholders.

d.it is appropriate to borrow if the return on the assets is greater than the cost of the financing.

3. Which of the following is a measure of the time that it takes to convert current assets into cash?

a.Working capital.

b.Number of days' sales in inventory.

c.Accounts receivable turnover ratio.

d.Cash-to-cash operating cycle.

18. Which of the following ratios is the best measure in analyzing a company's ability to pay interest on long-term debt and to repay the long-term debt over several years?

a.Debt-to-equity ratio.

b.Acid-test ratio.

c.Times interest earned ratio.

d.Debt service coverage ratio.