[amp_mcq option1=”$$\\frac{{{\\text{Gross debt}}}}{{{\\text{Net debt}}}}$$” option2=”$$\\frac{{{\\text{Long term debt}}}}{{{\\text{Gross capitalization}}}}$$” option3=”$$\\frac{{{\\text{Gross debt}}}}{{{\\text{Gross equity share capital}}}}$$” option4=”$$\\frac{{{\\text{Net average profit}}}}{{{\\text{Gross share capital}}}}$$” correct=”option3″]<\/p>\n
The correct answer is: $\\frac{{{\\text{Long term debt}}}}{{{\\text{Gross capitalization}}}}$.<\/p>\n
This ratio is called the debt-to-equity ratio. It measures the proportion of a company’s assets that are financed by debt, as opposed to equity. A high debt-to-equity ratio indicates that a company is using a lot of debt to finance its operations. This can be risky, as it means that the company is more likely to go bankrupt if it is unable to repay its debts. However, a high debt-to-equity ratio can also be a sign that a company is growing rapidly, as it may be using debt to finance its expansion.<\/p>\n
The other ratios you provided are not as relevant for your decision. The gross debt to net debt ratio measures the amount of debt a company has relative to its cash and short-term investments. This ratio is not as useful for long-term investors, as it does not take into account a company’s long-term debt. The gross equity share capital ratio measures the amount of equity a company has relative to its total assets. This ratio is not as useful for long-term investors, as it does not take into account a company’s long-term debt or its profitability. The net average profit to gross share capital ratio measures a company’s profitability. This ratio is not as useful for your decision, as it does not take into account a company’s debt load or its growth potential.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”$$\\frac{{{\\text{Gross debt}}}}{{{\\text{Net debt}}}}$$” option2=”$$\\frac{{{\\text{Long term debt}}}}{{{\\text{Gross capitalization}}}}$$” option3=”$$\\frac{{{\\text{Gross debt}}}}{{{\\text{Gross equity share capital}}}}$$” option4=”$$\\frac{{{\\text{Net average profit}}}}{{{\\text{Gross share capital}}}}$$” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-59841","post","type-post","status-publish","format-standard","hentry","category-accounting","no-featured-image-padding"],"yoast_head":"\n