Question

Ratios that measure a firm's financial leverage are known as ________ ratios.

A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. market value

Answer 1

Financial leverage ratios, known as long-term solvency ratios, are used to evaluate a firm's ability to meet long-term obligations and assess its risk level.

Step-by-step explanation:

Ratios that measure a firm's financial leverage are known as long-term solvency ratios. These ratios are used to assess a firm's ability to meet its long-term obligations and can be indicative of the level of risk the firm is taking on through its use of debt. The most common long-term solvency ratios include the debt-to-equity ratio, the debt ratio, and the interest coverage ratio. These ratios help investors and creditors understand the long-term financial stability of a company.