A retailer's assets are very small relative to its liabilities.The retailer has _____.

Question

Quizplus · Accepted Answer

When a retailer's assets are much smaller in value than its liabilities, it indicates high financial leverage. This means that the retailer relies heavily on borrowed funds to finance its operations, which can be risky in case of financial downturns or cash flow problems. Low fixed assets, low profit margin, or high net worth do not necessarily relate to the size of liabilities in comparison to assets.

A Retailer's Assets Are Very Small Relative to Its Liabilities