All of the following statements accurately describe the debt ratio except.
A)It is of use to both internal and external users of accounting information.
B)A relatively low ratio signifies lower risk.
C)The ratio is computed by dividing total liabilities by total assets.
D)Higher financial leverage means greater risk.
E)The ratio is computed by dividing total equity by total liabilities.

Question

Quizplus · Accepted Answer

The debt ratio is computed by dividing total liabilities by total assets, not by dividing total equity by total liabilities as stated in option E.

All of the Following Statements Accurately Describe the Debt Ratio