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

Question

Quizplus · Accepted Answer

The debt to equity ratio is calculated by dividing total liabilities by total equity. If a company is financing more assets with debt than with equity, the numerator (total liabilities) will be higher than the denominator (total equity), resulting in a ratio higher than 1.

If a Company Is Financing More Assets with Debt Than