[The following information applies to the questions displayed below.] The current balance sheet of Gamma reports total assets of $30 million, total liabilities of $3 million, and owners’ equity of $27 million. Gamma is considering several financing possibilities in order to expand operations. Each question based on this data is independent of any others. What will be the effect on Gamma’s debt ratio if Gamma’s owner invests an additional $5 million to finance its expansion?

A. The debt ratio will decrease from 3/27 before to 3/32 after the additional investment.
B. Additional investment by owner will have no effect on the debt ratio.
C. The debt ratio will decrease from 0.1 (3 ÷ 30) to 0.0857 (3 ÷ 35) after the additional investment.
D. The debt ratio will increase from 30 before to 35 after the additional investment.