The higher the ________ ratio,the lower the degree of protection afforded creditors and the closer creditors' interest approaches the owner's interest.
A)debt-to-net worth
B)quick
C)asset turnover
D)current

Question

Quizplus · Accepted Answer

The debt-to-net worth ratio reflects the company's reliance on leverage or borrowed funds, and a higher ratio indicates a greater amount of debt as compared to the amount of owner's equity in the business. This means that the creditors' interests are not well-protected and the company may have a higher risk of default on its debt obligations. As the ratio increases, it can indicate that the creditors are taking on more risk and that their interests are becoming increasingly aligned with the owners rather than being protected separately.

The Higher the ________ Ratio,the Lower the Degree of Protection