Which of the following statements is false with regard to the debt ratio?
A)It is of use to both internal and external users of accounting information.
B)A relatively high ratio is always desirable.
C)The dividing line for a high and low ratio varies from industry to industry.
D)Many factors such as the company's age,stability,profitability,and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
E)The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.

Question

Quizplus · Accepted Answer

A relatively high debt ratio is not always desirable as it indicates that the company is highly leveraged and may have difficulty paying back its debts. A low debt ratio is generally considered better as it shows a lower level of risk for the company.

Which of the Following Statements Is False with Regard to the Debt