The debt-to-equity ratio ________.
A)is total shareholders' equity divided by total liabilities
B)is total liabilities divided by total shareholders' equity
C)describes a company's ability to make the interest payments on its debt
D)measures the firms' ability to pay its bills on time

Question

Quizplus · Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by total shareholders' equity. This ratio measures the proportion of a company's financing that comes from debt compared to equity. A higher ratio indicates that more of the company's financing comes from debt, which can increase the company's financial risk.

The Debt-To-Equity Ratio ________