Which of the Following Statements Is True of the Debt

question 50

Multiple Choice

Which of the following statements is true of the debt to equity ratio?

• A)The higher the debt to equity ratio,the lower the company's financial risk.
• B)The higher the debt to equity ratio,the greater the company's financial risk.
• C)If the debt to equity ratio is greater than 1,the company is financing more assets with equity than with debt.
• D)If the debt to equity ratio is less than 1,the company is financing more assets with debt than with equity.

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Definitions:

Income Summary

The Income Summary is an account where revenues and expenses are compiled to show the net result of a company's operations for a particular period.

Permanent Account

An account within the general ledger that is not closed at the end of the accounting period, including assets, liabilities, and shareholders' equity accounts.

Accounting Time Period

The span of time covered by financial statements, typically a fiscal quarter or year, during which all financial transactions are recorded and reported.

Quarter

A three-month period on the financial calendar that acts as a basis for periodic financial reporting and dividends.