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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