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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.

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Comments ( 3 )

  1. CA Meenakshi
    CA Meenakshi :
    3 years ago

    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.

  2. Ali Arslan
    Ali Arslan :
    4 years ago

    How

  3. Sugandha Kumari
    Sugandha Kumari :
    5 years ago

    How

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