A higher financial leverage ratio indicates that _____.

The dependency of the firm on the debt is more.

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The proportion of equity in the total capital is high.

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None of the above

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The dependency of the firm on the debt is less.

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Solution

The correct option is A
The dependency of the firm on the debt is more.

The dependency of the firm on the debt is more.
Explanation: A higher ratio shows a more prominent capacity to meet commitments related to the leverage ratios to quantify an organisation’s capacity to pay its monetary commitments. Debt capacity alludes to the aggregate sum of debt a business can incur and reimburse as per the details of the debt arrangement.

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