Which ratio measures a company's ability to meet its long-term debt obligations?a.Acid-test ratiob.Current ratioc.Debt-to-equity ratiod.Return on equity ratio

To determine which ratio measures a company's ability to meet its long-term debt obligations, we will analyze each option provided:

1. Acid-test ratio: This is a liquidity ratio that measures a company's ability to pay off its current liabilities without relying on the sale of inventory. It does not directly address long-term obligations.

2. Current ratio: This ratio compares a company's current assets to its current liabilities, indicating its capacity to pay short-term obligations. Similar to the acid-test ratio, it does not focus on long-term debt obligations.

3. Debt-to-equity ratio: This ratio compares a company's total liabilities to its shareholder equity. It provides insight into the degree to which a company is financing its operations with debt versus wholly owned funds. It is closely related to assessing long-term obligations.

4. Return on equity ratio: This measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested. It does not specifically measure the ability to meet debt obligations.

Final Answer

The debt-to-equity ratio (option c) is the most relevant measure of a company's ability to meet its long-term debt obligations.