In examining the debt utilization ratios,the primary purpose is to measure:
A) ability to effectively employ its resources.
B) overall debt position.
C) ability to pay short-term obligations on time.
D) ability to generate timely cash flows.

Question

Quizplus · Accepted Answer

The debt utilization ratios such as debt-to-equity ratio, debt-to-assets ratio, and interest coverage ratio are used to measure the overall debt position of a company. These ratios help in analyzing a company's debt level and its ability to meet its financial obligations. Therefore, option B is the best choice as it reflects the primary purpose of examining debt utilization ratios. Option A evaluates the company's efficiency in using its resources, while option C and D assess the ability to pay short-term obligations and generate cash flows, respectively.

In Examining the Debt Utilization Ratios,the Primary Purpose Is to Measure