-Kamal Company's debt-to-equity ratio was 0.52 to 1 in 2017 and 0.58 to 1 in 2016. Which of the following statements is true concerning Kamal ?

Question

Quizplus · Accepted Answer

The decrease in the debt to equity ratio indicates that Kamal is improving its ratio and is relying less rather than more on creditors in 2017. The company actually has more stockholder equity as a percentage of total assets (common size analysis) in 2017 than in 2016 and appears to be in a stronger position at the end of 2017 even after acquiring close to $100,000 of additional long term debt. The debt-to-equity ratio does not address the ability to generate cash flows from operations.

-Kamal Company's Debt-To-Equity Ratio Was 0