Asked by jessica Musgrave on Jun 18, 2024
Verified
The risk of creditors in relation to the risk taken by stockholders is measured by:
A) debt to stockholders' equity ratio.
B) gross profit ratio.
C) rate of return to stockholders.
D) None of these answers are correct.
Debt to Stockholders' Equity Ratio
A financial metric that shows the balance between the debt and equity shareholders have employed to fund a company's assets.
Gross Profit Ratio
The Gross Profit Ratio is a financial metric that compares gross profit to net sales, expressed as a percentage, indicating the efficiency of a company in managing its production and labor costs.
Rate of Return to Stockholders
The percentage of return investors receive from their shares in a company, including dividends and stock price appreciation.
- Ascertain and calculate the metrics that evaluate creditor risk versus shareholder risk.
Verified Answer
KD
kalsang dolmaJun 22, 2024
Final Answer :
A
Explanation :
The debt to stockholders' equity ratio measures the proportion of a company's financing that comes from creditors and investors. A higher ratio indicates that creditors are taking on more risk compared to stockholders, as it means the company is using more debt relative to equity.
Learning Objectives
- Ascertain and calculate the metrics that evaluate creditor risk versus shareholder risk.