Which of the following is considered a good/safe rule-of-thumb debt ratio for businesses?
A)0.8 or below
B)0.6 or below
C)1.0 or above
D)1.5 or above

Question

Quizplus · Accepted Answer

A debt ratio of 0.6 or below is considered a good/safe rule-of-thumb debt ratio for businesses. This means that a business has less debt than equity, indicating lower risk and higher ability to meet financial obligations. Higher debt ratios (such as 0.8 or above) indicate a higher level of financial risk and potential difficulty in meeting obligations. A debt ratio of 1.0 or above means that a business has more debt than equity, which may signal financial distress. A debt ratio of 1.5 or above is very high and would generally be considered unsustainable for most businesses.

Which of the Following Is Considered a Good/safe Rule-Of-Thumb Debt