Which of the following statements regarding the debt-to-equity ratio is correct?

A) A high ratio means that the company is primarily financed through stockholder investments.
B) A higher ratio is preferred.
C) The debt-to-equity ratio is a measure of a company's ability to pay its debt.
D) The debt-to-equity ratio is a measure of investor and creditor risk.

Debt-to-Equity Ratio

A measure showing the balance of debt versus shareholders' equity employed in the procurement of company assets.

Financed

The process of providing or securing funds for business activities, purchases, or investments.

Investor and Creditor Risk

The level of uncertainty faced by investors and creditors due to the possibility of a company failing to meet its financial obligations.