________ help us analyze whether a company is moving toward financial stress or is using debt to benefit the company and ultimately,the owners of the company.
A)Financial leverage ratios
B)Asset management ratios
C)Days' sales in inventory
D)Total asset turnover

Question

Quizplus · Accepted Answer

Financial leverage ratios such as debt-to-equity ratio, interest coverage ratio, and debt-to-assets ratio provide insight into a company's use of debt and whether they have excessive levels of debt that could lead to financial stress. A high debt-to-equity ratio and debt-to-assets ratio generally indicate that a company is heavily reliant on debt as a source of funding, which increases the level of risk associated with the company's ability to repay their debt obligations. On the other hand, a reasonable debt-to-equity ratio and interest coverage ratio can indicate that a company is using debt prudently to generate higher returns for the company and its owners.

________ Help Us Analyze Whether a Company Is Moving Toward