At the end of Year 1, the following information is available for Grumpy, Happy, and Doc Companies. Which company has the highest level of debt risk?
A)Grumpy
B)Happy
C)Doc
D)They all have equal debt risk.

Question

At the end of Year 1, the following information is available for Grumpy, Happy, and Doc Companies.  Which company has the highest level of debt risk?
A)Grumpy 
B)Happy 
C)Doc 
D)They all have equal debt risk.

Quizplus · Accepted Answer

Grumpy Company has the highest debt ratio of 1.4, which indicates that it has more debt than equity. This puts Grumpy at a higher risk for defaulting on its debt obligations. Happy Company has a debt ratio of 0.5, which indicates a moderate level of debt risk, and Doc Company has a debt ratio of 0.8, which also indicates a moderate level of debt risk. Therefore, Grumpy has the highest level of debt risk compared to Happy and Doc Companies.

At the End of Year 1, the Following Information Is