The Lower the Debt Ratio

question 10

Multiple Choice

The lower the debt ratio:

• A)the harder it is for the business to borrow funds to carry it through a short-term cash shortage
• B)the easier it is for the business to borrow funds to carry it through a short-term cash shortage
• C)the more financially stable the business is
• D)the higher its interest payments are likely to be

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Definitions:

Mortgage-Backed Security

A type of asset-backed security that is secured by a mortgage or collection of mortgages.

Home Loans

Loans offered by financial institutions to individuals for the purchase of homes, typically secured by the property itself.

Economic Model

A simplified representation of economic processes, used to analyze and predict economic behaviors.

Financial Crisis

A broad term for a variety of situations in which some financial assets suddenly lose a large part of their nominal value, often leading to a collapse of markets and economies.