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Indicate for each ratio given below, if its value should be low or high. a. Debt...

Indicate for each ratio given below, if its value should be low or high. a. Debt ratio _______________ b. Current ratio ______________ c. Debt-payments ratio _______________ d. Savings ratio ______________

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Answer #1

Debt ratio = Debt / Total Assets

It is expected to have low rate as depending highly on debt may lead to finance risk

Current ratio = Current assets / Current liabilities

It explains how many times of Current Assets are available to payoff current liabilities, thus it is expected to be high.

Debt- payments Ratio = Debt payment / Income

It expains, what % of income is used for payment of debt, Thus it is expected to be low

Savings ratio = [ ( Income - Expenditure ) / Income ]

It explains, what % of Income is saved, thus it expected to be more.

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