A high debt ratio:
A)means that creditors provide a large percentage of the company's total financing.
B)gives a small business more borrowing capacity.
C)decreases the chances that creditors will lose money if the business is liquidated.
D)decreases the creditor's interest in the business.

Question

Quizplus · Accepted Answer

A high debt ratio means that creditors provide a large percentage of the company's total financing, indicating that the company has taken on a significant amount of debt. This can be a risky financial position for the company as it may struggle to meet its debt obligations if it experiences a downturn in business. However, it may also indicate that the company is able to secure favorable borrowing terms from lenders due to its relatively low risk profile.

A High Debt Ratio