Which of the Following Does the Debt Ratio Measure

question 65

Multiple Choice

Which of the following does the debt ratio measure?

• A) The company's overall ability to pay its liabilities
• B) The company's ability to pay current liabilities with current assets
• C) The proportion of the company's assets that are financed with equity
• D) The company's ability to invest in growth

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of assets or services.

Stockholders' Equity

The ownership stake of shareholders in a corporation, which is the value left over from the assets after liabilities have been taken out.

Treasury Stock

Shares that were issued and later reacquired by the company, reducing the amount of outstanding stock.

Par Common Stock

The nominal value assigned to share of common stock, as specified in the corporate charter, which represents the minimum price shares can be issued.