FOX Company has a ratio of (total debt/total assets) that is above the industry average, and a ratio of (long term debt/equity) that is below the industry average.These ratios suggest that the firm
A)utilizes assets effectively.
B)has too much equity in the capital structure.
C)has relatively high current liabilities.
D)has a relatively low dividend-payout ratio.

Question

Quizplus · Accepted Answer

A high (total debt/total assets) ratio indicates that the company has a high level of debt in comparison to its assets, which often includes a significant amount of current liabilities. The lower (long term debt/equity) ratio suggests that, relative to its equity, the company does not have as much long-term debt, implying that the debt is more short-term or current in nature.

FOX Company Has a Ratio of (Total Debt/total Assets) That