Assertion (A): A low debt-equity ratio is generally recommended for a newly started business. Explanation:The debt-to-equity ratio shows the proportion of equity and debt a company is using to finance its assets and signals the extent to which shareholder's equity can fulfill obligations to creditors, in the event of a business decline. A low debt-to-equity ratio indicates a lower amount of financing by debt via lenders, versus funding through equity via shareholders. A higher ratio indicates that the company is getting more of its financing by borrowing money, which subjects the company to potential risk if debt levels are too high. Simply put: the more a company's operations rely on borrowed money, the greater the risk of bankruptcy, if the business hits hard times. This is because minimum payments on loans must still be paid--even if a company has not profited enough to meet its obligations. For a highly leveraged company, sustained earnings declines could lead to financial distress or bankruptcy. Therefore, Assertion (A) is the correct statement. Reason (R): During the initial years of the business, debt servicing will prove to be less burdensome. Explanation:Thus, a low debt-equity ratio is generally recommended for a newly started business as debt servicing will prove to be less burdensome. Therefore, Reason (R) is correct and (R) is the correct explanation of (A).