Which ratio is used to assess a company's ability to meet its long-term obligati

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

Options:

Correct Answer: Debt to equity ratio

Solution:

The debt to equity ratio is used to assess a company\'s ability to meet its long-term obligations.

Which ratio is used to assess a company's ability to meet its long-term obligations?

Which ratio is used to assess 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 financial ratios. These are calculations that help evaluate a company's financial health.
Step 3: Identify the debt to equity ratio. This ratio compares a company's total debt to its total equity.
Step 4: Know why the debt to equity ratio is important. It shows how much debt a company has for every dollar of equity, indicating how well it can meet long-term obligations.
Step 5: Conclude that the debt to equity ratio is the correct ratio to assess a company's ability to meet its long-term obligations.

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