Which financial metric indicates the proportion of equity and debt in a company's capital structure?a.Return on Investment (ROI)b.Debt-to-Equity Ratioc.Earnings Per Share (EPS)d.Operating LeverageCLEAR MY CHOICE
Question
Which financial metric indicates the proportion of equity and debt in a company's capital structure?a.Return on Investment (ROI)b.Debt-to-Equity Ratioc.Earnings Per Share (EPS)d.Operating LeverageCLEAR MY CHOICE
Solution
The financial metric that indicates the proportion of equity and debt in a company's capital structure is the Debt-to-Equity Ratio. This ratio is calculated by dividing the company's total liabilities by its shareholder equity. It provides insight into the company's leverage, i.e., how much of its operations are financed by debt versus equity. A high ratio could indicate that the company has taken on a lot of debt, which could be risky, while a low ratio could suggest that the company is primarily financed by equity.
Similar Questions
Leverage or debt ratios measure the degree to which a firm relies on ______.Multiple choice question.profitabilitytangible assetsowners equityborrowed funds
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