A high debt to equity ratio indicates reliance on creditor financing thereby increasing the risk that a company will not be able to meet its obligations.

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A higher debt to equity ratio means that a company is using more debt financing compared to equity financing. This increases the risk that the company will not be able to meet its obligations, as it would need to make regular interest and principal payments to its creditors. In contrast, equity financing does not require regular payments, and the company can use its profits to distribute dividends to shareholders.

A High Debt to Equity Ratio Indicates Reliance on Creditor