Leverage Ratios Flashcards
What do leverage ratios indicate
stock ratios - indicate the amount of debt outstanding at a particular time
what are the leverage ratios
- leverage ratio, 2. debt ratio , 3 debt-equity ratio 4. times interest earned (TIE) ratio 5. cash flow to debt ratio
which ratios are also income statement flow ratios
- times interest earned ratio
what is the leverage ratio
total assets/ shareholder’s equity
TA/ SE
what is debt ratio
total debt / SE
what is the interest earned ratio
EBIT / Interest Expense
what is the cash flow to debt ratio
cash flow from operations / total debt
what does debt ratio show
indicates the proportion of total assets financed by debt at the balance sheet date
what does debt-equity ratio show
the proportion that total debt represents in relationship to SE
(Both common stock and retained earnings) at balance sheet date
what does times interest earned show
the number of times the firm’s pre-tax income (EBIT) exceeds its fixed financial obligations to its lenders
what does cash flow to debt ratio show
measures how long it would take to pay off firm’s debt using cash flow form operations
