Business, 20.09.2019 18:10 21hendlill

Debt management ratios measure the extent to which a firm uses financial leverage and the degree of safety afforded to 1 . they include the: (1) debt-to-assets ratio, (2) times interest earned ratio (tie), and (3) ebitda coverage ratio. the first ratio analyzes debt by looking at the firm' statementincome statementbalance sheetitem 2 , while the last two ratios analyze debt by looking at the firm' statementincome statementbalance sheetitem 3 . the debt-to-total-assets ratio measures the percentage of funds provided 4 . its equation is: high debt ratios that exceed the industry average may make it costly for a firm to borrow additional funds without first raising 5 . the times interest earned ratio measures the extent to 6 income can decline before the firm is unable to meet its 7 payments. its equation is: ebit is used as the numerator 8 is paid with pretax dollars—the firm's ability to 9 is not affected by taxes. the ebitda coverage ratio is: this ratio is more complete than the tie ratio because it recognizes that depreciation and amortization are 10 expenses, so these amounts are available to service debt, and lease payments and principal repayments are fixed payments.

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Debt management ratios measure the extent to which a firm uses financial leverage and the degree of...

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