Which of the following will not affect the calculation of leverage ratios?
A)Existence of operating leases
B)Existence of assets where fair value is much lower than book value
C)Existence of significant debt covenants
D)Existence of pension liabilities where projected benefit liability is much greater than plan assets and accumulated benefit obligation

Question

Quizplus · Accepted Answer

Leverage ratios are based on comparing the amount of debt to other financial measures such as equity, assets, or cash flows. Debt covenants are restrictions placed on a borrower by a lender to limit their activities and to protect the lender's interests. They do not affect the calculation of leverage ratios directly. However, they may indirectly affect the borrower's ability to take on more debt, which could impact leverage ratios in the future. The existence of operating leases, assets with fair value lower than book value, and pension liabilities will all impact the calculation of leverage ratios.

Which of the Following Will Not Affect the Calculation of Leverage