Users of financial statements consider a lower debt to total assets ratio to be
A)worse because it indicates higher risk of defaulting on debt payments.
B)better because it indicates that a company has lower leverage.
C)worse because it indicates reduced risk of defaulting on debt payments.
D)better because it indicates that a company has higher leverage.

Question

Quizplus · Accepted Answer

A lower debt to total assets ratio indicates that a company is using less debt financing relative to its assets, which suggests lower leverage and potentially lower financial risk.

Users of Financial Statements Consider a Lower Debt to Total