The ratio of liabilities to stockholders' equity is a measure of the extent of leverage, or proportion of borrowed capital, with which a business operates.

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The statement is true. The ratio of liabilities to stockholders' equity is commonly known as the debt-to-equity ratio and it is used to evaluate a company's financial risk. A higher ratio indicates that the company relies more on borrowed capital and has a higher degree of financial leverage.

The Ratio of Liabilities to Stockholders' Equity Is a Measure