What is the purpose of a leverage ratio?
What will be an ideal response?
The purpose of a leverage ratio is to determine what proportion of a firm's financing is composed of debt. While there is no one definition for leverage, the most common one is the ratio of long-term debt to total capitalization. The higher the level of debt, the higher the percentage of operating income that must be used to satisfy fixed obligations. Everything else equal, a higher leverage ratio indicates a greater the probability of default.
You might also like to view...
Items that are included on a bank statement and decrease the bank account balance are called _________________________
Fill in the blank(s) with correct word
________ involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk
A) Value-based pricing B) Competition-based pricing C) Cost-based pricing D) Penetration pricing E) Break-even pricing
It is important to understand the emotional contagion process because ______.
A. you can control peoples’ moods and emotions B. emotions (both positive and negative) can spread through groups and organizations C. emotions have little impact on employee outcomes D. moods have little impact on employee outcomes
Recusal is the disqualification of a judge or administrative hearing officer because of
bias or interest regarding the case. a. True b. False