Which of the following statements is false when describing the debt ratio?
A)It is of use to both internal and external users of accounting information
B)A relatively high ratio is desirable
C)The dividing line between a high and low ratio varies from industry to industry
D)Many factors such as 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 could be capable of increasing its income by going into further debt

Question

Quizplus · Accepted Answer

A high debt ratio indicates that a company has more debt than assets, which can be seen as risky by investors and lenders. Therefore, a relatively low ratio is generally more desirable, not a high one.

Which of the Following Statements Is False When Describing the Debt