In: Finance
Which of the following statements about the total debt to total assets ratio is NOT true?
The debt ratio is calculated by dividing a company's total liability by its total assets. |
"The higher the total debt to total asset ratio, the greater the financial risk." |
"If a company's debt to asset ratio is less than 0.5, most of its assets are financed through debt." |
A highly leveraged company could be in danger if its creditors demand repayment. |
The correct answer from the given choices is-
"If a company's debt to asset ratio is less than 0.5, most of its assets are financed through debt." |