ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Since the debt ratio is calculated by dividing liabilities by net worth, the lower the debt ratio the better; that is the better off the person is financially.

Detailed explanation-2: -A low asset-to-debt ratio is a positive indicator of financial well-being. The debt service-to-income ratio provides a view of total debt burden of an individual or family by comparing the dollars spent on gross annual debt repayments with gross annual income.

Detailed explanation-3: -Net worth is the sum of your assets (such as your cash savings, investments, and value of your home) minus the sum of your debts. In other words, it’s what you own minus what you owe.

Detailed explanation-4: -More often, the total-debt-to-total assets ratio will be less than one. A calculation of 0.5 (or 50%) means that 50% of the company’s assets are financed using debt (with the other half being financed through equity).

Detailed explanation-5: -A debt ratio used to measure a company’s financial leverage, calculated by dividing a company’s total liabilities by its stockholders’ equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders’ equity.