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

Question

Business

Peter Sullivan

24 January, 22:49

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

+2

Answers (1)

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Randy Leonard · Answer 1

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.

As the debt ratio increases,1. fewer assets are debt financed2. more assets are debt financed3. the ratio of debt to equity increases4. the ratio of debt to equity decreases

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