Multiple Choice QuestionRatios that measure how much debt an organization is using relative to other sources of capital, such as owners' equity are ______ ratios.Multiple choice question.liquidityprofitabilitydebt utilizationasset utilization
Question
Multiple Choice QuestionRatios that measure how much debt an organization is using relative to other sources of capital, such as owners' equity are ______ ratios.Multiple choice question.liquidityprofitabilitydebt utilizationasset utilization
Solution
The correct answer is "debt utilization".
Debt utilization ratios measure how much debt an organization is using relative to other sources of capital, such as owners' equity. These ratios can provide insights into the financial risk of a company. A higher debt utilization ratio indicates that a larger portion of the company's financing comes from debt, which can be risky if the company does not have enough income to cover its debt payments.
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