The debt ratio is used:
A) To measure the ratio of equity to expenses.
B) To assess the risk associated with a company's use of liabilities.
C) Only by banks when a business applies for a loan.
D) To determine how much debt a firm should pay off.
E) To determine how much debt a company should borrow.

Question

Quizplus · Accepted Answer

The debt ratio measures the proportion of a company's total assets financed by debt, which can indicate the risk associated with its use of liabilities. This information is important to potential investors and creditors, as a high debt ratio may signal a higher risk of default. The other options are not accurate descriptions of the debt ratio's use.

The Debt Ratio Is Used