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What does a high debt-to-equity ratio indicate?

  1. A The company is highly leveraged and carries greater financial risk
  2. B The company has no debt
  3. C The company is highly profitable
  4. D The company has excess cash
Answer

The company is highly leveraged and carries greater financial risk

Leverage magnifies returns in good times and losses in bad. High gearing raises the risk of financial distress if earnings fall.

All Finance MCQs

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