Final answer:
The degree of financial leverage, option b, is the ratio that gives a perspective on risk in a company's capital structure. It shows how fixed-income securities affect a company's earnings and the associated risk of bankruptcy during low earning periods.
Step-by-step explanation:
The ratio that gives a perspective on risk in the capital structure is b. degree of financial leverage. This measure helps determine how a company's earnings are affected by the use of fixed-income securities, such as debt and preferred equity. When a firm uses debt financing, it incurs a fixed cost in the form of interest payments. If the company generates a higher return on investment (ROI) than the cost of debt, the excess earnings will benefit the equity holders, leading to leveraged returns. However, in times of low earnings, the interest payments can severely impact a company’s profitability and increase its bankruptcy risk.
Book value per share provides investors with the net asset value of a company per share. Dividend yield is the annual dividend income per share divided by the current price per share. Price/earnings ratio is the ratio of a company’s current share price to its earnings per share.