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:

Unemployment

The condition wherein people who are able and willing to work and are actively looking for work cannot secure a job.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheated economy by raising interest rates or increasing reserve requirements.

Inflation

The frequency at which the all-encompassing costs of goods and services heighten, eroding financial purchasing capability.

Unemployment Rate

The percentage of the labor force that is jobless and actively looking for work.