The Debt Ratio Is Used

question 174

Multiple Choice

The debt ratio is used:

• A)To measure the amount of equity relative to the expenses.
• B)To reflect the risk associated with a company's debts.
• C)Only by banks when a business applies for a loan.
• D)To determine how much debt a firm should pay off.
• E)To determine who a company owes.

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Definitions:

Processing Float

The time delay between when a check is written and when it is actually deducted from the payer's account, often utilized in managing company cash flows.

Cash Balances

Cash balances refer to the amount of currency, coins, and balances in checking and savings accounts that a company holds at any given time.

Pledging Agreement

A contract in which a borrower pledges an asset as collateral for a loan, ensuring the lender can seize the asset if the loan is not repaid.

Account Receivable

Money owed to a business by its clients or customers for goods or services delivered or used but not yet paid for.