Asked by Tesha Cherry on Apr 27, 2024
Verified
FOX Company has a ratio of (total debt/total assets) that is above the industry average, and a ratio of (long term debt/equity) that is below the industry average. These ratios suggest that the firm
A) utilizes assets effectively.
B) has too much equity in the capital structure.
C) has relatively high current liabilities.
D) has a relatively low dividend-payout ratio.
E) None of the options are correct.
Total Debt
Total Debt represents the aggregate amount of both short-term and long-term financial obligations owed by an individual, company, or other entity.
Long Term Debt
Borrowings of a company or government that are due to be repaid over a period longer than one year.
Capital Structure
The mix of debt and equity financing used by a company to fund its operations and growth.
- Evaluate the consequences of financial ratios on a company's operational success compared to sector benchmarks.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
C
Explanation :
The firm's high total debt to total assets ratio suggests it has high liabilities, and the lower long-term debt to equity ratio indicates that a significant portion of its debt is likely in the form of current liabilities, rather than long-term debt.
Learning Objectives
- Evaluate the consequences of financial ratios on a company's operational success compared to sector benchmarks.