Which of the Following Statements Regarding the Debt to Equity

question 55

Multiple Choice

Which of the following statements regarding the debt to equity ratio is correct?

• A)A high ratio means that the company is primarily financed through stockholder investments.
• B)A higher ratio is preferred.
• C)It is a measure of a company's ability to pay its debt.
• D)It is a measure of investor and creditor risk.

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Definitions:

Cognitive-Dissonance Theory

The view that we are motivated to make our cognitions or beliefs consistent with each other and with our behavior.

Effort Justification

In cognitive-dissonance theory, the tendency to seek justification (acceptable reasons) for strenuous efforts.

Self-Serving Bias

The tendency to view one’s successes as stemming from internal factors and one’s failures as stemming from external factors.

Sternberg's Triangular Model

A theory of love suggesting that intimacy, passion, and commitment are the three components that define all human love relationships.