Which Ratio Would You Use to Measure the Financial Health

question 120

Multiple Choice

Which ratio would you use to measure the financial health of a firm by assessing that firm's leverage?

• A)debt-equity or equity multiplier ratio
• B)market-to-book ratio
• C)market debt-equity ratio
• D)current or quick ratio
• E)price-to-book ratio

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Definitions:

Earnings Before Taxes

The income a company generates before taking into account the income tax expense.

Sales Price

The amount a buyer pays to purchase a product or service.

Net Present Value

The current value of an investment's projected earnings, discounted at an appropriate interest rate, minus the initial capital cost.

Required Rate

The lowest return an investor is willing to accept on an investment to deem it as profitable.