Using Debt-Related Financial Ratios


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question 1 of 3

Which of the following BEST defines debt?

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1. Thomas has a company that has $20,000 in total liabilities, while his assets total $40,000. What is his company's debt ratio?

2. Jane's company is currently doing very well and has cleared all financial reviews without any problems. Her company has a lot of assets. Which of the following is the MOST likely debt ratio of Jane's company?

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About This Quiz & Worksheet

A business's levels of debt determines its ability to gain access to new financing or payback its creditors. A number of debt-related ratios are utilized to measure this characteristic of businesses. To successfully pass this quiz, you will need a good understanding of business finance.

Quiz & Worksheet Goals

To demonstrate your competence of debt-related ratios, you will be quizzed on the following:

  • The definition of debt
  • The accounting methods used to measure debt
  • What various ratios reveal about the health of a business

Skills Practiced

  • Distinguishing differences - contrast and compare the various versions of debt ratios
  • Critical thinking - apply your knowledge of debt-related ratios to hypothetical business situations to determine the health of the business
  • Reading comprehension - ensure that you draw the most important information on the different methods and purposes of debt ratios

Additional Learning

To learn more, please refer to the accompanying lesson entitled Using Debt-Related Financial Ratios. The lesson covers:

  • The different versions of debt ratios
  • What each ratio measures
  • How each ratio is used to determine the financial viability of a business