The debt to owners’ equity ratio measures the extent to which a compan

QUESTION

The debt to owners’ equity ratio measures the extent to which a company uses debt to finance its operations.

Indicate whether the statement is true or false.

ANSWER

Answer: TRUE
Explanation: The debt to owners’ ratio consists of total liabilities divided by owners’ equity. If it is high, it means liabilities are too high, which usually indicates that the firm is carrying too much debt.