[amp_mcq option1=”The ratio of total debt to share holder’s equity is called ‘debt ratio'” option2=”The ratio debt-to-total assets is called Debt-to-total assets ratio” option3=”The ratio of earnings before interest and taxes for a particular reporting period to the amount of interest charges for the period is called interest coverage ratio” option4=”All of these” correct=”option4″]
The correct answer is D. All of these.
The debt ratio is a measure of a company’s financial leverage, calculated by dividing its total debt by its total equity. A high debt ratio indicates that a company is using a lot of debt to finance its operations, which can be risky if interest rates rise or the company’s profits decline.
The debt-to-total assets ratio is a measure of a company’s financial leverage, calculated by dividing its total debt by its total assets. A high debt-to-total assets ratio indicates that a company is using a lot of debt to finance its assets, which can be risky if interest rates rise or the company’s profits decline.
The interest coverage ratio is a measure of a company’s ability to pay its interest expenses, calculated by dividing its earnings before interest and taxes (EBIT) by its interest expense. A high interest coverage ratio indicates that a company has a lot of cushion to pay its interest expenses, even if its profits decline.
All of these ratios are important for investors to consider when evaluating a company’s financial health. A high debt ratio, debt-to-total assets ratio, or interest coverage ratio can be a sign of risk, but it is important to consider the company’s overall financial situation and business model before making any investment decisions.