Answered

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Higher debt utilization ratios will always increase a firm's return on equity given a positive return on assets.
A. True
B. False

Sagot :

Answer:

A. True

Explanation:

The debt utilization ratios is used to determine the comprehensive picture for the long term financial health of the company or the solvency of the company.

The debt ratio is defined as the financial ratio which shows the percentage of the assets of an organization which are provided through a debt. When the ratio is higher, the risk involved with the operation of the firm is more.

Thus, for a high debt utilization ratio, it will always increase the return of the organization on the equity for a positive return on the assets of the organization.

Thus, the answer is TRUE.

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