Which one of these best measures a firm's long-run ability to meet its obligations?
A)Cash ratio
B)Total asset turnover
C)EV multiple
D)Return on equity
E)Equity multiplier

Question

Quizplus · Accepted Answer

The equity multiplier measures the extent to which a firm relies on debt financing to fund its operations. A higher equity multiplier signifies higher leverage and higher financial risk. Therefore, it is a better measure of a firm's long-run ability to meet its obligations as it reflects its overall financial structure and solvency.

Which One of These Best Measures a Firm's Long-Run Ability