Final answer:
A debt ratio of 84% indicates that ABC Corp has financed most of its assets through debt. This high ratio suggests potential risk but also the possibility of increased returns for shareholders. It is an important indicator of the company's financial structure and health.
Step-by-step explanation:
An ABC Corp with a debt ratio of 84% indicates that the company has financed the majority of its assets through borrowing rather than through shareholder investment. This is a financial leverage ratio that compares the company's total liabilities to its total assets and provides insight into the company's financial structure. A high debt ratio suggests that the company might be at risk if it's unable to meet its debt obligations; however, it also can potentially increase shareholders' returns if the firm can earn a higher rate of return on its investments than the cost of debt.
Understanding the company's debt ratio is important for stakeholders including investors, creditors, and management, as it reflects the company's ability to sustain its operations and finance its expansion. It is important to analyze it in combination with other financial metrics to fully assess the company's financial health.