ЁЯУв Too many exams? DonтАЩt know which one suits you best? Book Your Free Expert ЁЯСЙ call Now!


    Question

    A high Debt-Equity Ratio

    indicates:
    A Low financial risk Correct Answer Incorrect Answer
    B High operational efficiency Correct Answer Incorrect Answer
    C High reliance on external debt Correct Answer Incorrect Answer
    D Strong liquidity position Correct Answer Incorrect Answer
    E Low cost of capital Correct Answer Incorrect Answer

    Solution

    The Debt-Equity Ratio (Total Debt / Total Equity) measures a company's financial leverage. A high ratio indicates that the company is aggressively funding its growth with debt, which can be risky because debt must be repaid with interest regardless of business performance, increasing financial risk (contrary to A).

    Practice Next
    More Accounts Questions
    ask-question