Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Debt to Equity Ratio

Financial Accounting

14. Financial Statement Analysis

Ratios: Debt to Equity Ratio

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Multiple Choice

Which ratio measures the degree to which managers use debt or equity to finance ongoing operations?

Inventory Turnover Ratio

Debt to Equity Ratio

Gross Profit Margin

Current Ratio

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Verified step by step guidance

Step 1: Understand the concept of the Debt to Equity Ratio. This ratio measures the proportion of debt and equity used by a company to finance its operations. It is a key indicator of financial leverage and risk.

Step 2: Recognize that the Inventory Turnover Ratio, Gross Profit Margin, and Current Ratio do not measure the use of debt or equity. These ratios focus on inventory management, profitability, and liquidity, respectively.

Step 3: Recall the formula for the Debt to Equity Ratio: \( \text{Debt to Equity Ratio} = \frac{\text{Total Liabilities}}{\text{Total Equity}} \). This formula highlights the relationship between the company's liabilities and equity.

Step 4: Note that a higher Debt to Equity Ratio indicates greater reliance on debt financing, while a lower ratio suggests more reliance on equity financing.

Step 5: Conclude that the correct answer to the question is the Debt to Equity Ratio, as it directly measures the degree to which managers use debt or equity to finance ongoing operations.