Question 6.KC.4: Biscayne has _______ leverage. a. Excessive. b. Inadequate. ...

Financial Statement Analysis

Biscayne has _______ leverage.
a. Excessive.
b. Inadequate.
c. The right amount of.
d. The wrong kind of.

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a. Correct. The company’s debt to equity ratio is 2.11 in an industry that averages 1.00. Part of the reason for this ratio being large is the loss in year 200Z, but the ratio was still larger than average the year before the loss.
b. Incorrect. Large debt ratios imply excessive leverage.
c. Incorrect. Large debt ratios imply excessive leverage.
d. Incorrect. I am not sure what the wrong kind of leverage would be in this case. So, this answer is incorrect because it makes no sense.

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