Accounting · Ratio Analysis
Consider the following statements regarding the Debt-to-Equity (D/E) Ratio: Statement 1: A D/E ratio significantly higher than the industry norm suggests that the company may face financial distress during economic downturns due to fixed obligations. Statement 2: A low D/E ratio indicates financial stability, but it may also suggest that management is failing to exploit the benefits of financial leverage. Statement 5: A successful debt-for-equity swap will see an immediate improvement (decrease) in its D/E ratio as total liabilities decrease and share capital increases. Statement 6: The D/E ratio can be artificially deflated by off-balance-sheet financing techniques, such as operating leases. Statement 7: To provide a comprehensive view of long-term solvency, the D/E ratio must be integrated with the Interest Coverage Ratio. Which of the following evaluations of these statements is accurate?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1Statements 1, 2, 5, 6, and 7 are correct.✓
- 2Statements 1, 3, 4, and 5 are correct.
- 3All statements are correct.
- 4Statements 1, 2, 4, and 7 are correct.
Correct answer
Statements 1, 2, 5, 6, and 7 are correct.
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Accounting?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Ratio Analysis MCQs →Want more practice questions on Ratio Analysis?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Accounting · Ratio Analysis