Question

Which ratios or numbers is it best to have the lower the better?

Group of answer choices

debt to asset ratio, average collection period, & days in inventory

debt to asset ratio, gross profit rate, & days in inventory

debt to asset ratio, average collection period, & return on assets

debt to asset ratio, accounts receivable turnover & days in inventory

Answer 1

Debt to asset ratio, average collection period and days in inventory are lower the better because it is good to have a low debt to asset ratio because low ratio means a company has a low amount of total debt compared to the value of assets. A lower average collection period is generally more favorable because it indicates that the organisation collects payments faster. For the days in inventory , the low days sales in inventory indicates that the business is efficient both in terms of sales performance and inventory management.