If a firm's total debt ratio is greater than .5, then:
A)Its current liabilities are quite high
B)Its debt-equity ratio exceeds 1.0
C)It has too few of total assets
D)It has more long-term debt than equity

Question

Quizplus · Accepted Answer

A total debt ratio greater than .5 means that more than half of the firm's assets are financed through debt. A debt-equity ratio exceeding 1.0 indicates that the firm has more debt than equity, which is a signal of financial risk. Therefore, option B is the correct choice.  Choices A, C, and D are incorrect because they do not accurately reflect the meaning of total debt ratio.

If a Firm's Total Debt Ratio Is Greater Than