A debt to equity ratio of 50% indicates that
A)half of the company's assets are financed through equity.
B)50% of the company's interest expense comes from long-term debt financing.
C)the company is close to bankruptcy.
D)the company spends 50% of its operating earnings on interest.

Question

Quizplus · Accepted Answer

A debt to equity ratio of 50% means that for every $1 of equity, the company has $0.50 of debt. This indicates that half of the company's assets are financed through equity.

A Debt to Equity Ratio of 50% Indicates That