Financial leverage ratios indicate the extent to which borrowed funds are used to finance assets.

Question

Quizplus · Accepted Answer

Financial leverage ratios, such as debt-to-equity ratio and debt-to-total-assets ratio, are used to measure the proportion of a company's assets that are financed through debt (borrowed funds) as opposed to equity (investor funds). Therefore, financial leverage ratios do indicate the extent to which borrowed funds are used to finance assets.

Financial Leverage Ratios Indicate the Extent to Which Borrowed Funds