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Business Studies

Other Factors Affecting Capital Structure

Financial Lev...

Question

Financial Leverage is computed as _______.

A

D/E

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B

E/D

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C

D + E/D

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D

D - E/D

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Solution

The correct option is A D/E
A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans), or assesses the ability of a company to meet its financial obligations.
The most well known financial leverage ratio is the debt-to-equity ratio. It is expressed as:
D/E Ratio = Total Debt / Total Equity

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