Both (A) and (R) are correct, and (R) is the correct reason for (A)
Both (A) and (R) are correct, but (R) does not explain (A) correctly
(A) is correct, but (R) is incorrect
(A) is incorrect, but (R) is correct
Answer is Right!
Answer is Wrong!
The correct answer is: A. Both (A) and (R) are correct, and (R) is the correct reason for (A).
Debt-equity ratio is a measure of a company’s financial leverage, which is the extent to which a company uses debt to finance its assets. A high debt-equity ratio indicates that a company is using a lot of debt to finance its assets, which can be risky if the company is unable to repay its debt.
The ability of a company to pay off its long-term liabilities is a measure of its long-term solvency. A company with a high debt-equity ratio may have difficulty paying off its long-term liabilities if it experiences financial difficulties.
Therefore, both (A) and (R) are correct, and (R) is the correct reason for (A).