Which debt ratio would indicate the BEST overall ability of an organization to pay its debts?
A) 25%
B) 40%
C) 60%
D) 130%

Question

Quizplus · Accepted Answer

A lower debt ratio indicates a better ability to pay debts. A ratio of 25% means that only 25% of the organization's assets are financed by debt, while the remaining 75% are financed by equity. This suggests that the organization has a strong financial position and can easily meet its debt obligations. Choices B, C, and D would all indicate higher levels of debt and could suggest financial risk for the organization.

Which Debt Ratio Would Indicate the BEST Overall Ability of an Organization