All of the Following Statements Accurately Describe the Debt Ratio

question 65

Multiple Choice

All of the following statements accurately describe the debt ratio except.

• A)It is of use to both internal and external users of accounting information.
• B)A relatively low ratio signifies lower risk.
• C)The ratio is computed by dividing total liabilities by total assets.
• D)Higher financial leverage means greater risk.
• E)The ratio is computed by dividing total equity by total liabilities.

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Definitions:

Stakeholder Groups

Collections of individuals or organizations that have an interest, right, or ownership in a company and can affect or be affected by the business' actions.

Organization's Mistakes

Errors or miscalculations made by a business or an entity that can lead to setbacks or challenges but also offer opportunities for learning and improvement.

Probability of Effect

The likelihood that a specific outcome or impact will occur as a result of a certain action or event.

Harm

Physical injury or damage to someone's health or well-being, or the potential to cause such effects.