Which of the following statements is true about the debt ratio? a. The higher the debt...

Which of the following statements is true about the debt ratio?

a. The higher the debt ratio, the less risk a company is taking in managing its operations.

b. The debt ratio measures the percent of the company's debt that is financed by its assets.

c. The use of the debt ratio decreases the financial leverage of a company.

d. The debt ratio is useful in assessing the solvency and future earning potential of a company.

Solutions

Expert Solution

None of the option is correct.

debt ratio calculated as the debt upon equity. Hence higher the debt ratio, the more the financial leverage. Financial leverage is the additional income over interest expense that the company can earn with increased finance available.

ekkarill92 answered 1 year ago

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