Financial leverage ratios measure the
A)amount of interest paid by the firm
B)firm's use of fixed-charge financing
C)amount of equity funds retired by the firm
D)static ratio

Question

Quizplus · Accepted Answer

Financial leverage ratios measure a firm's use of fixed-charge financing, which includes both debt and preferred stock. These ratios indicate the degree of financial risk associated with a company's capital structure. Examples of financial leverage ratios include debt-to-equity ratio, debt-to-capital ratio, and interest coverage ratio. Option A is incorrect because interest paid is just one component of fixed-charge financing. Option C is incorrect because equity funds retired is not directly related to leverage ratios. Option D is incorrect because there is no such thing as a "static ratio."

Financial Leverage Ratios Measure the