Financial Ratios (Scenario)
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. Donna had asked Jan to provide several calculations to help her gain an understanding of the company's financial shape. Jan realized that this was a great career opportunity—one that could make or break her reputation with the new vice-president. She quickly pulled out her old financial management textbook and turned to the chapter on financial ratios to review the required calculations.
-Donna was also very interested in examining the organization's use of debt to finance its assets.Therefore,Jan needed to calculate a(n)________ ratio.

Question

Quizplus · Accepted Answer

The leverage ratio evaluates how much of a company's assets are financed by debt compared to equity. This ratio provides insight into the company's ability to pay off its debts and indicates the risk associated with the level of debt. Donna's interest in examining the company's use of debt makes the leverage ratio the best choice for Jan to calculate.

Financial Ratios (Scenario) Jan Was in a Big Hurry. She Had Just Been