Which of the Following Statements Is True About the Debt

question 27

Multiple Choice

Which of the following statements is true about the debt to equity ratio?

• A)The greater the debt to equity ratio the smaller the opportunity to increase the return on equity of a firm through financial leverage.
• B)The greater the debt to equity ratio the greater the chance the firm will not meet its debt obligations.
• C)The size of a of a company's debt to equity ratio is directly related to amount of a firm's sales.
• D)The lower the debt to equity ratio the higher the risk that financial leverage will have a negative impact on a firm's return on equity.

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Definitions:

Business Proposition

An offer or proposal made by a company to a potential customer or partner that outlines the benefits and costs of a business arrangement.

Value Analysis

A methodical approach to examining the functions of goods or services with the purpose of achieving the desired quality at the lowest cost.

Marketing Plan

A comprehensive document or strategy that outlines a company's advertising and marketing efforts for a specific period.

Retailer

A business or person that sells goods directly to consumers, as the final link in the supply chain from manufacturers to end buyers.