Question

10. A commercial banker would prefer a
debt-equity ratio over the years as it indicate
financial strength of a unit.
(a) Declining
(b) Increasing
(c) Stable
(d) Fluctuating
​

Answer 1

The answer is declining

Answer 2

A commercial banker would prefer a debt-equity ratio over the years as it indicate financial strength of a unit (a) Declining

Explanation:

• The debt-to-equity (D/E) ratio is a calculation that compares a company's total commitments to its shareholder equity to assess how much leverage it has.
• Higher leverage ratios usually indicate a more risky firm or stock for investors.
• The D/E ratio, on the other hand, is difficult to compare across industry sectors due to differing debt levels.
• Investors commonly alter the D/E ratio to focus on long-term debt since the risks associated with long-term liabilities differ from the risks connected with short-term debt and payables.