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 high ratio is always desirable.
C)The dividing line for a high and low ratio varies from industry to industry.
D)Many factors such as a company's age,stability,profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
E)The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.

Question

Quizplus · Accepted Answer

A high debt ratio indicates that a company has a larger portion of its assets funded by debt, which can lead to financial risk and potentially limit borrowing or investment opportunities in the future. Therefore, a relatively low ratio is often considered more desirable, as it suggests a more sustainable financial structure.

All of the Following Statements Accurately Describe the Debt Ratio