If the debt/assets ratio increases, the costs of both debt and equity decrease.

Name: If the debt/assets ratio increases, the costs of both debt and equity decrease.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When the debt/assets ratio increases, it indicates that the company has taken on more debt relative to its assets. This makes the company riskier and less attractive to investors, causing the costs of both debt and equity to increase. Therefore, the statement is false.

If the Debt/assets Ratio Increases, the Costs of Both Debt