Question

    Which financial ratio determines whether a farmer’s

    own capital is sufficient to cover loans taken from external sources?
    A Debt-equity ratio Correct Answer Incorrect Answer
    B Rate of return Correct Answer Incorrect Answer
    C Income ratio Correct Answer Incorrect Answer
    D Price ratio Correct Answer Incorrect Answer
    E Loan-to-value ratio Correct Answer Incorrect Answer

    Solution

    The debt-equity ratio measures the extent to which a farmer’s operations are financed through debt versus owned capital. A lower ratio implies financial strength.

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