Financial Ratios Jan was in a big hurry.She had just been given the assignment of reporting on the financial health of her company to the new divisional vice president.Donna, the new vice president, had asked Jan to work up several calculations to help her gain an understanding of the company's financial shape.Jan was working hard and had a big order to fill, one that could make or break her reputation with Donna.She quickly pulled out her old financial management textbook and turned to the chapter on financial ratios to help her answer the questions that were asked.
-Refer to Financial Ratios (Scenario).Donna also asked Jan to give her an idea of the organisation's ability to meet the interest payments on its debt.Therefore, Jan looked to the section on ________ ratios.
A)leverage
B)activity
C)profitability
D)liquidity
E)financial

Question

Quizplus · Accepted Answer

Leverage ratios are used to measure the extent to which a company relies on debt financing. These ratios include interest coverage ratio, debt to equity ratio, and debt to asset ratio, which can all provide insights into the company's ability to meet interest payments on its debt.

Financial Ratios Jan Was in a Big Hurry