Which of the Following Is True of the Debt Ratio

question 51

Multiple Choice

Which of the following is true of the debt ratio?

• A) It reflects ability to meet long-term financial obligations.
• B) It shows managers and investors how much return the organization is generating relative to its assets.
• C) It indicates how liquid an organization's assets are.
• D) It indicates the effectiveness of specific functional areas.
• E) It helps estimate the organization's ability to cover interest expenses on borrowed capital.

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Definitions:

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.

Comparative Balance Sheet

A financial statement that compares balance sheets of different periods side by side, highlighting changes in assets, liabilities, and equity.

Collections

The process of pursuing payments of debts owed by individuals or businesses, often managed by a department or an agency.

Credit Sales

Sales made on credit, where the payment is received after the delivery of goods or services.