Which of the following will result in a decrease in a firm's financial debt-to-assets ratio?
A)A firm pays out dividends to its shareholders.
B)A firm buys equipment using a bank loan.
C)A firm repurchases some of its stock.
D)A firm buys inventory using trade credit.

Question

Quizplus · Accepted Answer

Buying inventory using trade credit does not increase the firm's financial debt, so it will result in a decrease in its debt-to-assets ratio. Choices A, B, and C all involve some form of funding that will increase the firm's debt, therefore they will not result in a decrease in the ratio.

Which of the Following Will Result in a Decrease in a Firm's