All of the Following Statements Regarding the Ratio of Liabilities

question 20

Multiple Choice

All of the following statements regarding the ratio of liabilities to stockholders' equity are true except

• A) A ratio of 1 indicates that liabilities equal stockholders' equity.
• B) The ratio is calculated as total liabilities divided by total stockholders' equity.
• C) The higher this ratio, the better able a business is to withstand poor business conditions and pay creditors.
• D) The lower this ratio is, the better able a business is to withstand poor business conditions and pay creditors.

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