Areeana Company has a debt-to-assets ratio of 0.60.Which of the following,if it occurred on the last day of the accounting period,would increase Areeana's debt-to-assets ratio?
A)Borrowing with a short-term promissory note.
B)Paying off some accounts payable.
C)Lending money to employees on a promissory note.
D)None of the answers are acceptable.

Question

Quizplus · Accepted Answer

Borrowing with a short-term promissory note increases the liabilities, which will increase the debt-to-assets ratio. Paying off accounts payable or lending money to employees will decrease the liabilities, decreasing the debt-to-assets ratio. Therefore, only option A will increase the debt-to-assets ratio.

Areeana Company Has a Debt-To-Assets Ratio of 0