As a stockholder, Charlotte is concerned about the level of long-term debt her company has.Which ratio would you recommend for determining whether or not her company has too much debt?
A) return on owners' equity
B) debt turnover
C) acid-test ratio
D) debt-to-owners' equity
E) equity-to-debt return

Question

Quizplus · Accepted Answer

The debt-to-owners' equity ratio compares a company's long-term debt to its owners' equity. This ratio is a good indicator of a company's financial leverage and ability to pay back its debts. A high ratio suggests that the company is using more debt to finance its operations, which can be risky for stockholders. Therefore, it is a suitable ratio to determine if a company has too much debt.

As a Stockholder, Charlotte Is Concerned About the Level of Long-Term