Which of the following characterizes a highly leveraged company?
A)high total assets relative to total debt
B)high total debt relative to total assets
C)high total debt relative to inventories
D)high total interest payments relative to total debt

Question

Quizplus · Accepted Answer

A highly leveraged company is one with a high level of debt relative to its assets. This is because the company has borrowed heavily to finance its operations and investments, which can increase the risk of default if it is unable to generate sufficient cash flow to meet its debt obligations. High total assets relative to total debt would indicate a company is conservatively financed, while high total debt relative to inventories or high total interest payments relative to total debt are not necessarily indicative of overall leverage.

Which of the Following Characterizes a Highly Leveraged Company