At the end of the fiscal year for Santos Industrial Machinery, management raised concerns about the company's financial performance. The company's accountants have been asked to analyze the current financial state of the company by using ratio analysis. Santos needs to assess its debt situation with respect to the value of the company. Which of the following, if true, would most strengthen the case that Santos's debt is manageable?
A) Santos has a high profitability ratio.
B) Santos has a high inventory turnover ratio.
C) Santos has a low inventory turnover ratio.
D) Santos has a high debt-to-owners'-equity ratio.
E) Santos has a low debt-to-owners'-equity ratio.

Question

Quizplus · Accepted Answer

A low debt-to-owners'-equity ratio indicates that the company has a lower level of debt in relation to its owners' equity, which indicates that the company has a manageable level of debt. A high profitability ratio or high inventory turnover ratio may indicate strong financial performance, but it does not directly address the company's debt situation.

At the End of the Fiscal Year for Santos Industrial