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

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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.

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