Final answer:
The debt ratio considers the proportion of all stockholders' equity that is financed with debt.
Step-by-step explanation:
T or F: The debt ratio considers the proportion of all stockholders' equity that is financed with debt.
The statement is True. The debt ratio, also known as the debt-to-equity ratio, is a financial ratio that measures the proportion of a company's total debt to its total stockholders' equity. It indicates the extent to which a company is financed by debt versus equity.
To calculate the debt ratio, you divide the total debt of a company by its total stockholders' equity. The formula is:
Debt Ratio = Total Debt / Total Stockholders' Equity
For example, if a company has $1 million in total debt and $2 million in total stockholders' equity, the debt ratio would be 0.5 or 50%. This means that 50% of the company's equity is financed with debt.