Problem 1. When computing the debt ratio, do you think the result would be more useful to financial statement users if the numerator included all liabilities as shown on the balance sheet, all liabilities as shown on the balance sheet plus any contingencies, or only long-term liabilities? Why
Problem 2. In assessing the ability of a company to repay the principal on its long-term debt, one of the primary ratios analyzed is the debt ratio. In this situation, would the analyst also be concerned with profitability? Why or why not?