If a Company Is Financing More Assets with Debt Than

question 120

Multiple Choice

If a company is financing more assets with debt than with equity,the ________.

• A) debt to equity ratio will be more than 1
• B) debt to equity ratio will be between 0 to 1
• C) debt to equity ratio will be equal to 1
• D) debt to equity ratio will be negative

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Definitions:

Profit Margin

A financial metric indicating the percentage of revenue that remains as profit after accounting for costs and expenses.

Retention Ratio

The fraction of net profit not disbursed as dividends, instead held within the company.

EBIT

Earnings Before Interest and Taxes is a financial indicator that calculates a company's earnings by excluding interest and income tax expenses.

Interest Expense

The cost incurred by an entity for borrowing money, typically expressed as an annual rate applied to the borrowed principal.