Which of the following is true regarding the debt to equity ratio?
A) The debt to equity ratio is a stringent measure of liquidity.
B) The debt to equity ratio measures the productivity and desirability of the equity investment.
C) The debt to equity ratio measures management's ability to productively employ all its resources.
D) The debt to equity ratio measures the capital structure of the entity.

Question

Quizplus · Accepted Answer

The debt to equity ratio measures the proportion of financing provided by debt versus equity and therefore measures the capital structure of the entity. It does not measure liquidity, productivity, or management's ability to employ resources.

Which of the Following Is True Regarding the Debt to Equity