A Company Had Total Assets of $400,000 and a Debt-To-Assets

question 139

Multiple Choice

A company had total assets of $400,000 and a debt-to-assets ratio was 0.35.Which of the following statements is not true?

• A)Total liabilities are $140,000.
• B)The debt-to-assets ratio of 0.35 indicates that the company relies less on equity financing than on debt financing.
• C)If other companies in the same industry are used as benchmarks and report a lower debt-to-assets ratio,this indicates that this company has a more risky financing strategy.
• D)If the ratio this year is lower than it was last year for this company,it indicates that the company is relying less on debt financing this year.

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Definitions:

Net Income

A company’s final income after deducting all expenses and taxes from its gross revenue.

Domestic Corporations

Corporations that are incorporated and operate within the legal boundaries of a particular country, subject to that country's laws and regulations.

Deferred Income Tax Liability

A tax obligation due in the future for income already earned and recognized for accounting purposes.

Operating Income

Income generated from the regular operating activities of a business, excluding revenues and expenses from non-operating sources like investments.