Ratios that focus on the level of a firm's financial flexibility, including its ability to obtain more debt, are known as
A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) profitability ratios.

Question

Quizplus · Accepted Answer

Leverage ratios are the ones that focus on a firm's financial flexibility in terms of its ability to obtain more debt. These ratios analyze a company's ability to meet its debt obligations and the level of debt in relation to its assets and equity. Liquidity ratios focus on a firm's ability to meet short-term obligations, activity ratios measure how efficiently a company utilizes its assets, and profitability ratios analyze a company's ability to generate profits.

Ratios That Focus on the Level of a Firm's Financial