There was an upward trend in the ratio of the book value of debt to the book value of debt and equity throughout the 1990s.Some of this was due to the repurchasing of stock.The market value ratio of debt to debt and equity exhibited no upward trend.This can be explained by:
A)the change in the accounting rules of the period.
B)the difference between tax accounting and accounting for financial accounting purposes.
C)a large increase in the market value of equity that was greater than the increase in debt.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

The market value ratio of debt to debt and equity did not exhibit an upward trend because there was a large increase in the market value of equity that was greater than the increase in debt. This is likely due to factors such as the overall growth of the market during the 1990s and increased investor confidence in certain companies. The other options (A, B, and D) do not adequately explain the lack of an upward trend in the market value ratio of debt to debt and equity.

There Was an Upward Trend in the Ratio of the Book