Why Is It Important to Monitor Your Debt Level

question 120

Multiple Choice

Why is it important to monitor your debt level?

• A) So it does not become so high that you cannot cover the monthly payments
• B) So that you maintain a liquidity ratio of at least 2.5
• C) In order to qualify for another credit card to capture the introductory points
• D) So that your total debt does not exceed your annual income

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Definitions:

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Net Sales

The amount of sales revenue remaining after deducting returns, allowances for damaged or missing goods, and discounts.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period of time, resulting in a net profit or loss.

Budgeted Amounts

Estimated financial figures planned for a certain period, including revenues and expenses.