Most retailers like to operate with a financial leverage ratio of 1.0 or greater so as to minimize debt.

Question

Quizplus · Accepted Answer

Most retailers actually prefer to operate with a lower financial leverage ratio, typically around 0.5 to 1.0, in order to minimize the amount of debt they have and reduce the risk of financial instability. A higher financial leverage ratio means the retailer has more debt in proportion to its equity, which can make it more difficult to service that debt and can increase the risk of bankruptcy. Therefore, statement A is false.

Most Retailers Like to Operate with a Financial Leverage Ratio