The debt ratio of a firm would be increased by which of the following? An increase...
The debt ratio of a firm would be increased by which of the following?
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An increase in equity and keeping the debt same. |
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Decrease in debt and keeping the equity same |
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Decrease in sales causing decrease in dividends |
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Greater increase in debt than an increase in equity. |
Homework Answers
Ans. Option 4th
Explanation: The formula of debt ratio is as follows:
Debt ratio = Total debt / Total assets
*Debt ratio would be increased by the increase in total debts because debts are used as nominator in this formula.
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