Total monthly loan payments divided by monthly gross (before-tax) income; provides a measure of the ability to pay debts promptly is:
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A. B. C. D.D
The answer is D. Debt service ratio.
Debt service ratio (DSR) is a financial ratio that calculates the total amount of debt repayment obligations as a proportion of monthly gross income before taxes. In other words, it shows the percentage of a borrower's income that goes toward paying off their debt obligations each month.
The DSR is an important metric that lenders use to assess a borrower's ability to manage their debts and make timely payments. The higher the DSR, the more difficult it may be for the borrower to keep up with their payments, and the greater the risk that they will default on their loans.
To calculate the DSR, you simply divide your total monthly debt payments (including mortgages, car loans, credit card payments, and other debts) by your monthly gross income before taxes. For example, if your total monthly debt payments are $1,500 and your monthly gross income is $5,000, your DSR would be 30% ($1,500/$5,000).
The other options listed in the question are:
A. Solvency ratio - A solvency ratio is a financial ratio that measures a company's ability to meet its long-term debt obligations. It is not relevant to individual borrowers.
B. Liquidity ratio - A liquidity ratio is a financial ratio that measures a company's ability to meet its short-term debt obligations. It is not relevant to individual borrowers.
C. Savings ratio - A savings ratio is a financial ratio that compares a person's savings to their disposable income. It is not directly related to debt repayment.