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    Question

    A company’s debt-to-equity ratio increases from 1.5 to

    2.5 over the year. What can be a likely interpretation?
    A The company has issued more equity Correct Answer Incorrect Answer
    B The company’s financial leverage has decreased Correct Answer Incorrect Answer
    C The company has borrowed more debt Correct Answer Incorrect Answer
    D The retained earnings have increased Correct Answer Incorrect Answer

    Solution

    An increase in the debt-to-equity ratio indicates greater reliance on external borrowings.

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