If a Firm Has a Debt to Owners' Equity Ratio

question 124

Multiple Choice

If a firm has a debt to owners' equity ratio of .75 (or 75%) we can conclude that

• A) it has relied more on debt than equity to finance its operations.
• B) the firm is likely to have trouble paying its short-term debts when they come due.
• C) its total liabilities are less than its owners' equity.
• D) the firm has expenses that are exactly 75% of its gross profit.

---

Definitions:

Summer Wages

Compensation paid to employees for work performed during the summer season, often applied to temporary or seasonal positions.

Compounded Quarterly

Interest calculation method where interest is added to the principal sum so that each following period's interest is calculated on a growing principal.

Annual Interest

The amount of interest to be paid or earned over a one-year period, usually expressed as a percentage of the principal.

Investing

The act of allocating resources, usually money, in order to generate income or profit.