A Note of Caution in Interpreting the Debt Ratio Is

question 17

Multiple Choice

A note of caution in interpreting the debt ratio is that

• A)all debt decreases liquidity ratios.
• B)financing arrangements, such as leases, may be off-balance sheet arrangement and not be classified as debt on the balance sheet.
• C)financing arrangements, such as leases, may be classified as debt when in fact they do not require interest payments.
• D)long-term debt may be inflated because of a desire to reduce the current ratio.