A debt/equity ratio of 8.1 means:
A) debt is turning over 8.1 times a year.
B) the firm is financing the company with 81% borrowed funds.
C) the firm has 8.1 times more debt than equity.
D) the firm has 81 times more equity than debt.

Question

Quizplus · Accepted Answer

The debt/equity ratio is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. A ratio of 8.1 means the company has 8.1 times more debt than equity, indicating a high level of debt compared to equity.

A Debt/equity Ratio of 8.1 Means