DEBT RATIO measures the percent of total funds provided by creditors. Debt includes both current liabilities and long-term debt. Creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditors losses in liquidation. Owners may seek high debt ratios, either to magnify earnings or because selling new stock would mean giving up control. Owners want control while "using someone elses money." Debt Ratio is best compared to industry data to determine if a company is possibly over or under leveraged. The right level of debt for a business depends on many factors. Some advantages of higher debt levels are:
Some disadvantages can be:
Formula: Total Liabilities / (Total Liabilities + Stockholders Equity)
STATE UNEMPLOYMENT TAX ACT (SUTA), in the U.S., is the same as FUTA except from an individual U.S. state in compliance to federal guidelines. See also FEDERAL UNEMPLOYMENT TAX ACT.
PASSIVE ACTIVITY is defined in the US Tax Code as one or more trades, business or rental activity that the taxpayer does not materially participate in managing or running. All income and losses from passive activities are grouped together on an income tax return and, generally, loss deductions are limited or suspended until the passive activity that generated them is disposed of in its entirety.
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