A high debt ratio is preferable to a low debt ratio, whereas a low current ratio is preferable to a high current ratio.

Question

Quizplus · Accepted Answer

This statement is incorrect. A high debt ratio indicates that there is a large amount of debt relative to assets or equity, which can be risky for a company. On the other hand, a low debt ratio indicates that a company has less debt and is therefore considered less risky. Similarly, a high current ratio indicates that a company has more current assets relative to current liabilities, which can be a sign of financial strength. A low current ratio indicates that a company may struggle to pay off its short-term obligations.

A High Debt Ratio Is Preferable to a Low Debt