Which ratio does not focus on ﬁnancial leverage?
A) Total debt ratio.
B) Debt/equity ratio.
C) Equity multiplier.
D) Times interest earned.
E) Cash ratio.

Question

Quizplus · Accepted Answer

The cash ratio focuses on a company's ability to meet short-term obligations using its available cash and cash equivalents. It does not take into account the use of debt or equity financing and therefore does not focus on financial leverage. The other ratios listed all involve the use of debt and/or equity to finance a company's operations and therefore focus on financial leverage.

Which Ratio Does Not Focus on ﬁNancial Leverage