Which debt ratio assesses a company's ability to survive adverse business conditions?

The most suitable choice for assessing a company's ability to survive adverse business conditions is the Long-term Debt Ratio. This ratio specifically measures the proportion of long-term debt in relation to the company's total assets, thereby providing insight into how much of the company's assets are financed through long-term borrowing. A lower long-term debt ratio indicates that a company has a greater proportion of its assets funded by equity or less leveraged by debt, which can be a sign of financial stability during downturns or difficult market conditions. In contrast, a high long-term debt ratio may suggest that a company is more vulnerable to adverse conditions due to its reliance on long-term debt.

The other ratios mentioned serve different purposes. The Debt-to-Equity Ratio, while indicative of leverage, focuses on the balance between debt and shareholder equity rather than the stability in the face of adverse conditions. The Current Ratio assesses short-term liquidity rather than long-term financial health, and the Profit Margin measures profitability rather than financial leverage or stability.