For some fi rst-hand experience with debt ratios, go to http://www.anz.com, the site of the Australian and New Zealand Banking Group.

Choose the “Business” tab; then select “Business Toolkit,” “Benchmark Your Business,” and

“Debt Ratio” from the menus on the left. Read the site’s content about debt ratios and, if possible, use the simple calculator to determine your business’s debt ratio.

a. What are the advantages and disadvantages of a high debt ratio (greater than 0.50)?

b. Why is the debt ratio useful as a business benchmark? LO.1