Which financial leverage ratio measures a company’s ability to repay its borrowings?
A.
Operating profit margin ratio
B.
Interest coverage ratio
C.
Total debt ratio
D.
Cash flow from operations to total debt ratio
The Answer Is:
D
This question includes an explanation.
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
The cash flow from operations to total debt ratio assesses a company’s ability to meet its debt obligations using cash generated from operations. The feedback from the document states:
"The cash flow from operations/total debt ratio gauges a company’s ability to repay the funds it has borrowed. A company’s annual cash flow should therefore be adequate to meet these commitments."