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Which of the following statements about the total debt to total assets ratio is NOT true?...

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.

Solutions

Expert Solution

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."

jeff jeffy answered 3 years ago
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