Which of the following statements would be the best interpretation of a company's low debt-to-equity ratio?
A) The company chooses to pay cash for most of its major purchases.
B) The company is not liquid.
C) The company prefers to pay stockholders high dividends out of their retained earnings.
D) The company prefers to raise funds by issuing capital stock than long-term borrowing.

Question

Quizplus · Accepted Answer

A low debt-to-equity ratio indicates that the company has a relatively low level of debt compared to its equity. In this case, it suggests that the company prefers to raise funds by issuing capital stock rather than taking on long-term debt.

Which of the Following Statements Would Be the Best Interpretation