The ability to add debt financing to the current borrowing of the firm and be able to make interest and principal repayments on time is known as the firm's debt-to-equity ratio.

Question

Quizplus · Accepted Answer

The statement is incorrect. The ability to add debt financing and make repayments in a timely manner is known as debt capacity rather than debt-to-equity ratio, which is a financial ratio that compares a firm's total debt to its total equity to assess the level of financial risk.

The Ability to Add Debt Financing to the Current Borrowing