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BusinessBusiness
31 March, 17:04

As the debt ratio increases,

1. fewer assets are debt financed

2. more assets are debt financed

3. the ratio of debt to equity increases

4. the ratio of debt to equity decreases

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Answers (1)
  1. 31 March, 17:08
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    2. more assets are debt financed

    3. the ratio of debt to equity increases

    Explanation:

    We know

    The formula of the debt ratio is presented below:

    Debt ratio = Total debt : Total assets

    where,

    Total debt would be

    = Current liabilities + Long term debt

    And the total assets = Total debt + owner's equity

    So, if the debt ratio is increased so it impacted the more assets for debt-financed plus the debt to equity ratio is also increased.
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