Question

A bank or other investor will consider a business solid if it has a debt ratio of

40%

50%

60%

70%

Answer 1

60%

......................

Answer 2

Answer:

40%

Explanation:

The debt ratio measures the percentage of total debt over total assets. This usually indicates how many assets were acquired through debt.

Usually a debt ratio of 40% or below is considered very healthy, good or solid. While a debt ratio of 50% or more is considered very risky, since the possibility of the business default is large.  

Depending on the industry, debt ratios between 40-49% can be good or bad, but we were not given more information.