Which Statement Regarding Debt Is NOT True

question 26

Multiple Choice

Which statement regarding debt is NOT true?

• A)A debt ratio of .50 means that debt finances half of the assets.
• B)The debt ratio measures the proportion of assets financed with debt.
• C)The higher the debt ratio, the lower the risk.
• D)The higher the debt ratio, the greater the pressure to pay interest and principal.

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Definitions:

K-Mart

A retail chain that was once one of America's leading discount stores, known for its blue light specials.

Tax-Free Acquisition

An acquisition in which the acquired company's shareholders do not have to pay taxes on the securities or cash they receive as part of the acquisition deal.

Business Purposes

The intention behind an action or decision in the context of conducting business.

Selling Shareholders

Investors or entities that own a company's shares and are selling them in a public offering or private sale.