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.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The firm's high total debt to total assets ratio suggests it has high liabilities, and the lower long-term debt to equity ratio indicates that a significant portion of its debt is likely in the form of current liabilities, rather than long-term debt.

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