1. Which of the following statements is true regarding debt ratios?

a. Firms with relatively low debt ratios have higher expected returns when business is good.

b. Firms with relatively low debt ratios are exposed to more risk as compared to firms with relatively high debt ratios, when business is poor.

c. Firms with relatively high debt ratios have higher expected returns when business is bad.

d. Firms with relatively high debt ratios have higher expected returns when business is good.

e. Firms with relatively low debt ratios have higher expected returns when business is poor.

2. A firm's net income as reported on its income statement is known as _____.

a. operating cash flow

b. net cash flow

c. noncash income

d. accounting profit

e. net sales