A small leverage ratio may indicate that a company is
A)well managed.
B)financed with a relatively large amount of common shareholders' equity.
C)financed with a relatively large number of shares of common and preferred stock.
D)financed with a relatively large amount of debt.
E)financed with a relatively large amount of debt and preferred stock.

Question

Quizplus · Accepted Answer

A small leverage ratio means that the company is relying less on debt and more on equity financing. This can indicate that the company has a large amount of common shareholders' equity, which suggests that it might be well-managed and able to generate sufficient profits to fund its operations without taking on too much debt.

A Small Leverage Ratio May Indicate That a Company Is