A company had total assets of $400,000 and a debt-to-assets ratio was 0.35.Which of the following statements is not true?
A)Total liabilities are $140,000.
B)The debt-to-assets ratio of 0.35 indicates that the company relies less on equity financing than on debt financing.
C)If other companies in the same industry are used as benchmarks and report a lower debt-to-assets ratio,this indicates that this company has a more risky financing strategy.
D)If the ratio this year is lower than it was last year for this company,it indicates that the company is relying less on debt financing this year.

Question

Quizplus · Accepted Answer

A debt-to-assets ratio of 0.35 means that 35% of assets are financed with debt;the remaining 65% are financed with equity.As such,a debt-to-assets ratio of 0.35 indicates more (rather than less)reliance on equity financing than on debt financing.

A Company Had Total Assets of $400,000 and a Debt-To-Assets