📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      A company can improve (lower) its debt-to-total assets

      ratio by doing which of the following?
      A Borrow more Correct Answer Incorrect Answer
      B Shift short-term to long-term debt Correct Answer Incorrect Answer
      C Shift long-term to short-term debt. Correct Answer Incorrect Answer
      D Sell common stock Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      The debt-to-total assets ratio is a measure of a company's financial leverage and indicates the proportion of its assets financed by debt. A lower ratio implies lower financial risk and a stronger financial position. Selling common stock, which represents equity financing, can improve the debt-to-total assets ratio. By selling common stock, a company can raise additional funds without increasing its debt levels.

      Practice Next
      More Financial Management Questions

      Relevant for Exams:

      ask-question