My Learning Cart
?
Categories
Account

Which ratio measures a company's ability to meet its long-term obligations?

₹0.0
Login to Download
  • 📥 Instant PDF Download
  • ♾ Lifetime Access
  • 🛡 Secure & Original Content

What’s inside this PDF?

Question: Which ratio measures a company\'s ability to meet its long-term obligations?

Options:

  1. Current Ratio
  2. Quick Ratio
  3. Debt to Equity Ratio
  4. Gross Profit Margin

Correct Answer: Debt to Equity Ratio

Solution: 

The Debt to Equity Ratio measures a company\'s financial leverage and its ability to meet long-term obligations by comparing total liabilities to shareholders\' equity.

Which ratio measures a company's ability to meet its long-term obligations?

Practice Questions

Q1
Which ratio measures a company's ability to meet its long-term obligations?
  1. Current Ratio
  2. Quick Ratio
  3. Debt to Equity Ratio
  4. Gross Profit Margin

Questions & Step-by-Step Solutions

Which ratio measures a company's ability to meet its long-term obligations?
  • Step 1: Understand what long-term obligations are. These are debts or financial commitments that a company needs to pay back over a long period, usually more than one year.
  • Step 2: Learn about the Debt to Equity Ratio. This ratio compares two important financial figures: total liabilities (what the company owes) and shareholders' equity (what the owners have invested in the company).
  • Step 3: Know how to calculate the Debt to Equity Ratio. The formula is: Debt to Equity Ratio = Total Liabilities / Shareholders' Equity.
  • Step 4: Interpret the ratio. A higher ratio means the company relies more on debt to finance its operations, which can indicate higher risk in meeting long-term obligations. A lower ratio suggests a more stable financial position.
No concepts available.
Soulshift Feedback ×

On a scale of 0–10, how likely are you to recommend The Soulshift Academy?

Not likely Very likely
Home Practice Performance eBooks