When a firm's long-term debt-equity ratio is .98,the firm:

Question

Quizplus · Accepted Answer

A long-term debt-equity ratio of less than 1 indicates that the firm's long-term debt is less than its equity. Therefore, option B is the correct answer. Option A is incorrect because the ratio compares long-term debt with equity, not leases. Option C is incorrect because a ratio of .98 is not necessarily indicative of insolvency. Option D is incorrect because the ratio indicates that long-term liabilities are less than equity, not equal to it.

When a Firm's Long-Term Debt-Equity Ratio Is