A Company Has a Debt-To-Assets Ratio of 0

question 8

Multiple Choice

A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%.If the company then issues additional shares of common stock for cash,which of the following is a correct statement?

• A)The debt-to-assets ratio will decrease and the return on equity ratio will decrease.
• B)The debt-to-assets ratio will increase and the return on equity ratio will increase.
• C)The debt-to-assets ratio will not change and the return on equity ratio will not change.
• D)The debt-to-assets ratio will decrease and the return on equity ratio will increase.

---

Definitions:

Labor

The engagement of human abilities, both physical and mental, in crafting goods and services.

Garden Gnomes

Decorative statues often placed in gardens, depicting mythological creatures known as gnomes.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded, typically downward sloping, indicating that demand decreases as price increases.

Plaster

A building material made of lime or gypsum, water, and sand, used for coating walls and ceilings.