Which of the following ratios examines the organization's use of debt to finance its assets and its ability to meet the interest payments on the debt?
A)liquidity ratios
B)leverage ratios
C)profitability
D)activity ratios

Question

Quizplus · Accepted Answer

Leverage ratios examine how much debt a company has taken to finance its assets and how well it can meet interest payments on that debt. Examples of leverage ratios include debt-to-equity ratio, debt-to-assets ratio, and interest coverage ratio. Liquidity ratios examine the company's ability to meet its short-term obligations, profitability ratios examine how profitable the company is, and activity ratios examine how efficiently the company is using its assets.

Which of the Following Ratios Examines the Organization's Use of Debt