Which ratios measure the extent of a firm’s financing with debt relative to equity and its ability to cover interest and fixed charges?

Question

asked Aug 1, 2021 192k views

1 Answer

Charlesliam · Answer 1 · 2021-08-05T13:18:29+0000

Answer:

Debt to Equity ratio and Times Interest Earned (TIE) ratio

Step-by-step explanation:

The Debt to Equity ratio measures the extent of a firm’s financing with debt relative to equity

Formulae :

Debt to Equity ratio = Total Debt ÷ Total Equity

The Times Interest Earned (TIE) ratio measures the ability of a firm ability to cover interest and fixed charges

Formulae :

Times Interest Earned (TIE) ratio = Earnings Before Interest and Tax ÷ Interest