RD - Commission on Dietetic Registration (CDR) Practice Test 2025 – The All-in-One Guide to Excel in Your Certification!

The debt to assets ratio is a key financial metric that assesses an establishment's ability to meet its long-term obligations. This ratio measures the proportion of an organization’s total assets that are financed through debt. A higher ratio indicates that a significant portion of the company's assets is funded by debt, which may raise concerns about its ability to meet long-term financial commitments. Conversely, a lower ratio suggests that the organization is more financially stable and can more effectively manage and meet its long-term obligations.

Understanding this ratio is crucial for stakeholders, including investors, creditors, and management, as it provides insights into financial leverage and risk. A business with a well-balanced debt to assets ratio demonstrates prudent management of its finances, enhancing its capacity to fulfill long-term debts, which is essential for sustained growth and operational stability.