A company has a debt to assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a true statement?
A)The debt to assets ratio will be unchanged.
B)The debt to assets ratio will increase.
C)The debt to assets ratio will decrease.
D)The debt to assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.

Question

Quizplus · Accepted Answer

Borrowing cash from the bank will increase the company's debt, but its assets remain the same. Therefore, the debt to assets ratio will increase.

A Company Has a Debt to Assets Ratio of 0