The correct answer is: B. Weak financial position
A proprietary ratio, also known as the equity ratio or owner’s equity ratio, is a financial ratio that measures the proportion of a company’s assets that are financed by its owners. It is calculated by dividing a company’s equity by its total assets.
A low proprietary ratio indicates that a company has a high level of debt financing. This can be a sign of a weak financial position, as it means that the company is more reliant on debt to finance its operations. This can make the company more vulnerable to financial difficulties, as it may have difficulty repaying its debts if its business performance deteriorates.
A high proprietary ratio, on the other hand, indicates that a company has a low level of debt financing. This can be a sign of a strong financial position, as it means that the company is more reliant on equity financing. This can make the company less vulnerable to financial difficulties, as it does not have to worry about repaying its debts if its business performance deteriorates.
It is important to note that a proprietary ratio is just one measure of a company’s financial health. It is important to consider other factors, such as a company’s debt-to-equity ratio and its cash flow, when assessing its financial position.