The higher a firm's long-term-debt-to-capital ratio is,the LESS financial risk the firm is taking on.

Question

Quizplus · Accepted Answer

The statement is false. The higher a firm's long-term-debt-to-capital ratio is, the more financial risk the firm is taking on. This is because the higher the ratio, the more heavily the firm is relying on debt to finance its operations, which increases the likelihood of financial distress if the firm is unable to make its debt payments.

The Higher a Firm's Long-Term-Debt-To-Capital Ratio Is,the LESS Financial Risk