Ratios that measure the ﬁrm's ﬁnancial leverage are known as:
A) Asset management ratios.
B) Long-term solvency ratios.
C) Short-term solvency ratios.
D) Proﬁtability ratios.
E) Market value ratios.

Question

Quizplus · Accepted Answer

Long-term solvency ratios measure the firm's ability to meet its long-term obligations and include ratios that measure financial leverage, such as debt-to-equity ratio and interest coverage ratio. Asset management ratios focus on how efficiently the firm is using its assets, short-term solvency ratios measure the firm's ability to meet its short-term obligations, profitability ratios measure the efficiency in generating profits, and market value ratios measure the firm's market value relative to its financial performance.

Ratios That Measure the ﬁRm's ﬁNancial Leverage Are Known As