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A company's balance sheet shows total assets of $2,000,000 and total liabilities of $800,000. If the owner's equity is $1,200,000, calculate the debt ratio and

A company's balance sheet shows total assets of $2,000,000 and total liabilities of $800,000. If the owner's equity is $1,200,000, calculate the debt ratio and discuss its significance in evaluating the company's financial leverage and risk exposure. Explore how variations in the debt ratio reflect differences in capital structure preferences and their impact on debt servicing costs, profitability, and solvency.

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