When only equity counts as capital, the leverage measure is
A)equal to the capital ratio.
B)equal to return on assets.
C)the inverse of return on assets.
D)the inverse of the capital ratio.

Question

Quizplus · Accepted Answer

When only equity counts as capital, the leverage measure is the inverse of the capital ratio. The capital ratio is the proportion of equity to total assets, so its inverse (total assets divided by equity) measures leverage.

When Only Equity Counts as Capital, the Leverage Measure Is