Which of the following ratios recognizes that many firms lease rather than buy a long-term asset?
A)Fixed charge coverage ratio
B)Times interest earned ratio
C)Debt ratio
D)Net profit margin
E)Equity multiplier ratio

Question

Quizplus · Accepted Answer

The fixed charge coverage ratio takes into account lease payments as well as interest and other fixed charges to determine a firm's ability to cover its fixed expenses. This ratio is specifically designed to recognize that many firms lease rather than buy long-term assets.

Which of the Following Ratios Recognizes That Many Firms Lease