Which of the Following Statements Is an Accurate Interpretation of a Debt

question 49

Multiple Choice

Which of the following statements is an accurate interpretation of a debt ratio of 0.60?

• A)The company has $0.60 of current assets for every $1.00 of current liabilities.
• B)The company has $0.60 of current liabilities for every $1.00 of current assets.
• C)The company has $0.60 of assets for every $1.00 of liabilities.
• D)The company has $0.60 of liabilities for every $1.00 of assets.

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Definitions:

Lending Standards

Regulations and criteria set by financial institutions to determine the qualification of borrowers for loans.

Alt-A Loans

Loans extended with little documentation or verification of the borrowers’ income, employment, and other indicators of their ability to repay. Because of this poor documentation, these loans are risky.

Economic Crisis

A situation where an economy faces a sudden downturn brought on by a financial crisis, resulting in high unemployment and inflation.

Foreclosure Rates

The frequency at which properties are forced to be sold due to the owner's failure to pay the mortgage.