learning objective 6 1 the debt to equity ratio measures the proportion of total lia 4306612

learning objective 6 1 the debt to equity ratio measures the proportion of total lia 4306612

Learning Objective 6

1) The debt to equity ratio measures the proportion of total liabilities relative to the total equity.

2) If a company is financing more assets with debt than with equity, then the ________.

A) debt to equity ratio will be more than 1

B) debt to equity ratio will be between 0 to 1

C) debt to equity ratio will be equal to 1

D) debt to equity ratio will be negative

3) Which of the following statements is true of the debt to equity ratio?

A) The higher the debt to equity ratio, the lower the company's financial risk.

B) The higher the debt to equity ratio, the greater the company's financial risk.

C) If the debt to equity ratio is greater than 1, the company is then financing more assets with equity than with debt.

D) If the debt to equity ratio is less than 1, the company is then financing more assets with debt than with equity.

4) Alexander Corp. has the following balances as on December 31, 2015:

Total Assets

$89,000

Total Liabilities

54,000

Total Equity

35,000

Calculate the debt to equity ratio. (Round your answer to two decimal points.)

A) 0.64

B) 0.04

C) 1.54

D) 1.65

5) The debt to equity ratio of four companies is given below.

Debt to equity ratio

Lewis Inc.

1.30

Jackson Inc.

1.50

Jones Corp.

0.88

Roberts Corp.

0.92

Which of the following companies has the greatest financial risk?

A) Lewis Inc.

B) Jackson Inc.

C) Jones Corp.

D) Roberts Corp.

6) The debt to equity ratio of four companies is given below.

Debt to equity ratio

Lewis Inc.

1.30

Jackson Inc.

1.50

Jones Corp.

0.88

Roberts Corp.

0.92

Which of the following companies has less debt than equity in its capital structure?

A) Lewis Inc.

B) Jackson Inc.

C) Jones Corp.

D) Roberts Corp.

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