Practice Solvency Ratios (Leverage Ratios) - 19.2.2 | 19. Financial Statement Analysis – Ratio Analysis | Management 1 (Organizational Behaviour/Finance & Accounting)
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19.2.2 - Solvency Ratios (Leverage Ratios)

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is the Debt-to-Equity ratio if total debt is $500,000 and shareholders' equity is $250,000?

💡 Hint: Total debt divided by shareholders' equity.

Question 2

Easy

If a company has EBIT of $60,000 and interest expense of $10,000, what is the Interest Coverage ratio?

💡 Hint: EBIT divided by interest expense.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What does a high Debt-to-Equity ratio indicate?

  • Low financial risk
  • High financial leverage
  • Low debt

💡 Hint: Think about how debt impacts financial stability.

Question 2

True or False: A higher Interest Coverage ratio suggests a company has a better ability to meet its debt obligations.

  • True
  • False

💡 Hint: Consider how EBIT relates to interest expenses.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A tech startup has $600,000 in total debt and $200,000 in equity. What is their Debt-to-Equity ratio, and what does this imply about their financial leverage?

💡 Hint: Calculate total debt divided by equity.

Question 2

If a firm has an EBIT of $250,000 and interest expenses of $75,000, calculate the Interest Coverage ratio and discuss its potential implications for investors.

💡 Hint: Divide EBIT by interest expenses for the ratio.

Challenge and get performance evaluation