All of the Following Statements Accurately Describe the Debt Ratio

question 207

Multiple Choice

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

• A) The dividing line for a high and low ratio varies from industry to industry.
• B) The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.
• C) A relatively high ratio is always desirable.
• D) Many factors such as a company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
• E) It is of use to both internal and external users of accounting information.

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Definitions:

Fixed Exchange Rate

A government policy to maintain the value of its currency at a set rate against another currency or a basket of currencies.

Covariance

A measure used in statistics to determine how much two random variables change together, indicating the direction of their linear relationship.

DAX Stock Market

The Deutscher Aktienindex (DAX), a major stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

Euro Bills

Short-term debt instruments issued by the European Central Bank and denominated in Euros.