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      Question

      A company has a Debt-Equity ratio of 4:1. Which of the

      following implications is most accurate?
      A Company is under-leveraged Correct Answer Incorrect Answer
      B Equity cushion is high Correct Answer Incorrect Answer
      C Financial risk is low Correct Answer Incorrect Answer
      D High leverage may signal repayment pressure Correct Answer Incorrect Answer
      E Company has strong liquidity Correct Answer Incorrect Answer

      Solution

      A D:E ratio of 4:1 implies high debt burden and low equity backing, indicating elevated financial risk and potential repayment issues.

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