Which one of the following ratios is the most correlated to default risk?

Name: Which one of the following ratios is the most correlated to default risk?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The debt to equity ratio measures the amount of debt a company has in relation to its equity. A higher debt to equity ratio indicates that a company has taken on more debt, which increases its financial risk and is generally associated with higher default risk. Therefore, it is the most correlated ratio to default risk.

Which One of the Following Ratios Is the Most Correlated