1) What is the measure of indebtedness?
Quick ratio
Current ratio
Times interest earned
Debt ratio
2) Do you want this measure higher or lower?
Higher
Lower
Answer 1)
Debt Ratio is the financial ratio which defines what percentage of Debt is used in respect of Total Assets. i.e. How much leverage has been used by the company. Other way to say this is what percentage of Total Assets are financed by Debt.
Option D is correct.
Answer 2)
Lower the Debt proportion in comparison to Total Assets, better it is because Debt increases the risk for the company.
Option B is correct.
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