Lower the Debt Equity ratio
A. Lower the protection to creditors
B. Higher the protection to creditors
C. It does not affect the creditors
D. None of the above
Answer: Option B
Solution (By Examveda Team)
Lower the Debt Equity ratio higher is the protection to creditors. Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the indication of greater protection to their money.This Question Belongs to Commerce >> Accounting
It's answer must b "it doesn't affect creditors" because creditors represent short term liability not d long term and debt equity ratios represent long term solvency of d firm.
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