Which of the following statements (in general) is correct? A. The lower the total debt-to-equity ratio, the lower the financial risk for a firm. B. A low receivables turnover is desirable. C. An increase in net profit margin with no change in sales or assets means a poor ROI. D. The higher the tax rate for a firm, the lower the interest coverage ratio.

Which of the following statements is incorrect?1 pointThe higher the debt-to-equity ratio, the more profit the company has recordedThe higher the debt-to-equity ratio, the more debt the company has on its balance sheetA high debt-to-equity ratio means the company has a lot of debt in relation to equityThe debt-to-equity ratio analyzes the relationship between total liabilities and total equity

Which of the following statements is NOT TRUE?Debt is costlier than equity.For the same business the firm can choose between the use of debt capital versus equity capital.Net profit can be substantially higher if debt is usedAll of the above

Which one of the following statements is true?Group of answer choicesLow debt ratio means most of the assets are financed by debt.Low debt ratio means most of the assets are financed by equity.Too little debt will reduce the business’s long-term flexibility.High debt ratio means most of the assets are financed by equity.

If a firm increases the proportion of debt in the capital structure:A.The cost of debt will increase but there will be no impact on the cost of equity.B.The cost of equity and the cost of debt will both increase, but its cost of capital will fall.C.The cost of equity will increase, but the impact on the firm’s cost of capital is unclear in the absence of specific information about financial distress costs and the firm’s tax position.D.The cost of equity will increase but the cost of debt will decrease.

Which of the following statements is not true? A. The sum of the debt ratio and the equity ratio does not have to equal 100%. B. The debt ratio indicates how many dollars of debt exist per dollar of assets. C. If the debt to equity ratio is more than 100%, the entity is more reliant on debt funding than equity funding. D. If the equity ratio is less than 50% then the entity is more reliant on debt funding than equity funding.