A low debt to total assets ratio reduces a creditor's risk if liquidation occurs.

Question

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A low debt to total assets ratio means that a company has a smaller amount of debt compared to its total assets. This indicates that the company has a lower risk of defaulting on its debt and a higher ability to pay back its creditors. In the event of liquidation, the company's assets would be sold to pay off its debts, and a low debt to total assets ratio would increase the likelihood of creditors being able to recover their money. Therefore, a low debt to total assets ratio would reduce a creditor's risk in such a scenario.

A Low Debt to Total Assets Ratio Reduces a Creditor's