The debt ratio is a measure of
1)financial leverage
2)the use of debt financing
3)asset utilization
A) 1 and 2
B) 1 and 3
C) 2 and 3
D) all of these choices

Question

Quizplus · Accepted Answer

The debt ratio measures the proportion of a company's assets that are financed through debt, making it a measure of both financial leverage (how much debt a company is using to finance its operations) and the use of debt financing (how much a company is relying on debt to fund its activities). It does not measure asset utilization. Therefore, choice B and C are incorrect while choice D includes incorrectly all three options.

The Debt Ratio Is a Measure of