Which of the following, if true, strengthens the case that Matheson's debt to owners' equity ratio will be low?
A) Matheson's net sales are high.
B) Matheson has a high amount of total assets.
C) Matheson's owners' equity is high.
D) Matheson has high total liabilities.
E) Matheson's net income is high.
Answer: C
Explanation: C) Owners' equity appears in the denominator of the debt to owners' equity ratio, so a high owners' equity would contribute to a low debt to owners' equity ratio. Choice D: Total liabilities appears in the numerator of the debt to owners' equity ratio, so this would contribute to a high debt to owners' equity ratio. The factors in choices A, B, and E do not appear in a debt to owners' equity ratio.
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