The ability of a company to repay its liabilities can be determined from its ________.

Question

Quizplus · Accepted Answer

The ability of a company to repay its liabilities can be determined from its debt ratio, which measures the proportion of a company's debt to its total assets. A high debt ratio indicates that a larger portion of a company's assets are financed by debt, implying a higher risk of default. Therefore, a low debt ratio indicates that a company has a lower risk of default and is more likely to be able to repay its liabilities. Bankers and creditors may also help assess a company's ability to repay its liabilities, but their opinions alone cannot provide a comprehensive view of a company's financial health. A journal is a record-keeping tool and is not used to determine a company's ability to repay its liabilities.

The Ability of a Company to Repay Its Liabilities Can