Which of the following statements is an accurate interpretation of the debt ratio?
A)A debt ratio above 1.00 is considered a good,safe ratio.
B)A debt ratio of 2.0 indicates a very strong ability to pay liabilities.
C)A debt ratio of 0.60 or lower is considered a high-risk ratio.
D)A debt ratio of 0.60 or lower is a good,safe ratio.

Question

Quizplus · Accepted Answer

A debt ratio of 0.60 or lower is generally considered a good, safe ratio as it indicates that a company has less debt in relation to its assets. A ratio above 1.00 indicates the company has more liabilities than assets, while a ratio of 2.0 would imply that the company has twice as much debt as assets, which could be a cause for concern. A debt ratio of 0.60 or lower is not a high-risk ratio, it is actually a lower-risk ratio.

Which of the Following Statements Is an Accurate Interpretation of the Debt