Long-term solvency ratios (financial leverage ratios), Financial Management

Long-Term Solvency Ratios (Financial Leverage Ratios)


Debt-Equity Ratio = Total Debt / Total Equity

à It is a measure of a company's debt utilization. It gives the extent to which a company is financed by debt.


Interest Coverage Ratio = EBIT / Interest

à It is also called as the 'Times Interest Earned' or 'TIE Ratio'. It is a measure of a company's interest obligations.


Cash Coverage Ratio = {EBIT + Depreciation} / Interest

à It is a measure of a company's interest obligation coverage by cash alone.





Posted Date: 7/25/2012 9:02:37 AM | Location : United States

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