As a company's debt-to-net worth ratio approaches 1:1,its creditors' interest in that business approaches that of the owners'.

Question

Quizplus · Accepted Answer

A debt-to-net worth ratio of 1:1 means that the company's debt is equal to its net worth. This indicates that the company has a high level of leverage and its creditors have a significant interest in the company's financial performance. As the creditors' interest approaches that of the owners, it can be said that they have a similar level of influence on the company's operations and decisions. Therefore, the statement is true.

As a Company's Debt-To-Net Worth Ratio Approaches 1:1,its Creditors' Interest