Question

Leverage ratios indicate:

A. the relative amount of funds in the business supplied by shareholders.

B. a company's ability to pay short-term debts.

C. management's ability to generate a financial return on sales or investment.

D. the profit margins for the last six months.

E. the future profits from the current customer base.

Answer 1

Leverage ratios indicate the relative amount of funds in the business supplied by shareholders. They are used to measure the extent to which a company relies on debt versus equity to finance its operations.

Step-by-step explanation:

Leverage ratios indicate the relative amount of funds in the business supplied by shareholders. They are used to measure the extent to which a company relies on debt versus equity to finance its operations. A higher leverage ratio indicates that a company has a higher proportion of debt in its capital structure, while a lower ratio indicates a higher proportion of equity.