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Farren Aurelia
on Nov 14, 2024

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Users of financial statements consider a lower debt to total assets ratio to be

A) worse because it indicates higher risk of defaulting on debt payments.
B) better because it indicates that a company has lower leverage.
C) worse because it indicates reduced risk of defaulting on debt payments.
D) better because it indicates that a company has higher leverage.

Debt To Total Assets Ratio

A financial ratio that measures the percentage of a company's assets financed by creditors through debt, indicating financial leverage.

Leverage

The use of borrowed funds to increase the potential return of an investment.

  • Comprehend the consequences of utilizing financial leverage on the solvency and profitability of a corporation.
  • Acquire knowledge on how to compute the debt to total assets ratio and the times interest earned ratio, along with their respective implications.
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MARYANN OKOYENov 20, 2024
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