An unsecured creditor ofTelnet Co. is monitoring Telnet’s financing activities. Two years ago, Telnet’s ratio of pledged assets to secured liabilities was 1.7. One year ago, the ratio climbed to 2.3, and the most recent financial report shows the ratio is now 3.1. Describe what this trend likely indicates about the company’s activities, specifically from the point of view of this unsecured creditor.

Exercise 10-15 Pledged assets to secured liabilities

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