John Davis Has a Debt Ratio of 0

question 82

Multiple Choice

John Davis has a debt ratio of 0.25,which tells us that John

• A)is insolvent since the ratio is less than 1.0.
• B)could have $10,000 in total assets and $7,500 in net worth.
• C)has 25% of his income allocated to reducing debt.
• D)might have $2,500 in liquid assets and $10,000 in current debts.

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Definitions:

Economic Efficiency

A situation where resources are allocated in the most effective way possible to meet an economy's needs and wants.

Roundabout Production

A process of investing in capital goods to enhance productivity and efficiency, typically leading to greater output in the long run.

Specialization

The process by which individuals, firms, or countries focus on producing a narrow range of products or services to gain greater efficiencies and yield higher quality or productivity.

Competitive Industry

An industry characterized by a large number of firms competing against each other, leading to innovation, lower prices, and improved products and services.