Question: How do analysts use ratios to analyze a firms financial leverage? Which ratios convey more important information to a credit analystthose revolving around the levels

How do analysts use ratios to analyze a firm’s financial leverage? Which ratios convey more important information to a credit analyst—those revolving around the levels of indebtedness or those measuring the ability to meet the contractual payments associated with debt? What is the relationship between a firm’s levels of indebtedness and risk? What must happen in order for an increase in financial leverage to be successful?

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Analysts use debt ratios to determine the firms financial leverageits use of debt financing A credit analyst is going to be concerned with a firms ability to repay its obligations She will care about times interest earned which demonstrates the firms ability to pay its interest and current and quick ratio which show how much in short term assets the firm has compared to its short term liabilities Financial leverage ... View full answer

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