Qualifying Ratio

A qualifying ratio is a number that represents how much debt a borrower can comfortably handle. This number is important because it helps creditors and investors understand how much risk they are taking on by lending money to or investing in a borrower. A high qualifying ratio means that a borrower is in good financial health and is unlikely to default on his debts. A low qualifying ratio, on the other hand, indicates that the borrower may struggle to make its debt payments and could default.

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