A company with a higher level of gearing will have:
A)a high liabilities/total assets ratio.
B)a lower owners' equity/total assets ratio.
C)a higher owners' equity/total assets ratio.
D)Both A and B.

Question

Quizplus · Accepted Answer

A company with a higher level of gearing will have higher liabilities, which will result in a higher liabilities/total assets ratio (option A). This also means that the owners' equity portion of the total assets will be lower, resulting in a lower owners' equity/total assets ratio (option B). Therefore, both options A and B are correct, making answer D the best choice.

A Company with a Higher Level of Gearing Will Have