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

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.

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