Leverage ratios measure:
A) The speed of changing assets into cash.
B) The degree to which a firm relies on borrowed funds in its operations.
C) How effectively a firm is using its various resources to achieve profits.
D) How well a company converts its resources to profits.

Question

Quizplus · Accepted Answer

Leverage ratios such as debt-to-equity ratio, debt-to-assets ratio, and interest coverage ratio measure the degree to which a company relies on borrowed funds in its operations. They indicate the proportion of a company's assets that are financed by debt, and the ability of the company to pay interest on that debt.

Leverage Ratios Measure