Which of the following ratios would Mitchell use to determine if his firm was using its resources to ensure it can meet its financial commitments in the longer term? (A) Gross profit (B) Debt to equity (C) Return on owners' equity (D) Accounts receivable turnover - HSC - SSCE Business Studies - Question 10 - 2004 - Paper 1

1. Gross profit: This indicates profitability but does not represent how obligations are managed long-term.
2. Debt to equity: This ratio compares a company's total debt to its shareholders' equity, indicating how much of the company is financed through debt versus owners' funds. This is crucial for assessing long-term financial health.
3. Return on owners' equity: While it relates to profitability and investor return, it does not specifically indicate financial commitments.
4. Accounts receivable turnover: This measures how efficiently a company collects its receivables but does not address long-term financial commitments.

(B) Debt to equity is the appropriate choice for determining if the firm is using its resources to meet long-term financial commitments.