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?

Question

Quizplus · Accepted Answer

E) The debt to owners' equity ratio is low if the firm's liabilities are low compared to the owners' equity, which would indicate that its debt is low. If the debt to owners' equity ratio is high, on the other hand (Choice D), it would indicate that Santos's debt is high. Profitability ratio (Choice A) is a measure of how well Santos is doing business, and does not pertain directly to its debt. Inventory turnover ratio (Choices B and C) does not pertain to debt.

Santos Needs to Assess Its Debt Situation with Respect to the Value