Which statement is true?
A)If the equity ratio is less than 50% then the entity is more reliant on equity funding than debt funding
B)The debt ratio indicates how many dollars of debt exist per dollar of equity financing
C)If the equity ratio is 50% the debt to equity ratio is 200%
D)The sum of the debt ratio and the equity ratio equals 100%

Question

Quizplus · Accepted Answer

The sum of the debt ratio and the equity ratio equals 100% because they represent the total financing of a company, with the debt ratio showing the proportion of assets financed by debt and the equity ratio showing the proportion financed by equity.

Which Statement Is True