Leverage Ratios and Analysis Flashcards
1
Q
Debt-Equity Ratio vs. Debt Ratio
A
Debt-Equity Ratio shows the proportion of financing provided by creditors (DEBT) and shareholders (EQUITY)
Debt Ratio focuses only on proportion of liquidation available to creditors (Bondholders) and shareholders (EQUITY). Secured creditors like bondholders are paid first.
2
Q
Debt-Equity Ratio
A
Total Debt / Total SHE
3
Q
Debt Ratio
A
Total Liabilities / Total Assets
4
Q
Affirmative covenant
A
A covenant that requires a corporation to maintain, at all times, some minimum level of working capital
