Leverage ratios measure the extent to which a firm uses equity rather than debt financing and show the firm's ability to pay its current bills without putting the firm in financial difficulty.

Question

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Leverage ratios actually measure the extent to which a firm uses debt financing rather than equity financing. They show the riskiness of a firm's financing mix and its ability to meet its long-term financial obligations.

Leverage Ratios Measure the Extent to Which a Firm Uses