A debt-to-asset ratio above 1 is more important than a liquidity ratio above 1.

Question

Quizplus · Accepted Answer

A debt-to-asset ratio above 1 indicates that a company has more liabilities than assets, which can be a red flag for investors and creditors. On the other hand, a liquidity ratio above 1 indicates that a company has enough current assets to cover its current liabilities, which is a positive sign for financial stability. While both ratios are important, a high debt-to-asset ratio can have more serious implications than a low liquidity ratio.

A Debt-To-Asset Ratio Above 1 Is More Important Than a Liquidity