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Which of the following ratios would indicate if the company has too much loans? debt ratio...

Which of the following ratios would indicate if the company has too much loans?

debt ratio

average collection period

current ratio

Return on equity
business   finance   
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Answer #1

Debt ratio is the ratio that describes the portion of debt and assets in total capital.

The formula for debt ratio is Debt / Equity.

When this ratio is higher than 1, then it means the firm has high amount of liabilities and most activities are financed by loans.

Thus, option a is the correct answer.

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