Leverage ratios indicate
A)the relative amount of funds in the business supplied by creditors and shareholders.
B)a company's ability to pay its short-term debts.
C)management's ability to generate a financial return on sales or investment.
D)a company's profit margins for the last six months.
E)the future profits the company can expect from its current customer base.

Question

Quizplus · Accepted Answer

Leverage ratios, also known as debt ratios, show the proportion of debt financing vs. equity financing in a company's capital structure. This indicates the relative amount of funds in the business supplied by creditors and shareholders, which is the definition given in choice A. The other options are not related to leverage ratios.

Leverage Ratios Indicate