How does one describe the way a business financed its resources?
A) By measuring its financial leverage
B) By measuring its return on capital employed
C) By measuring its financial structure
D) By calculating the net present value of future cash flows

Question

Quizplus · Accepted Answer

Measuring a business's financial structure involves analyzing how it financed its resources by looking at the mix of debt and equity in its capital structure. This can include measures such as debt-to-equity ratio or interest coverage ratio. Option A, measuring financial leverage, is similar but specifically refers to the amount of debt a company has relative to its equity. Option B, return on capital employed, is a measure of how efficiently a company is using its capital resources to generate profits but does not specifically address how the resources were financed. Option D, calculating net present value, is a method of evaluating the profitability of an investment, but not necessarily useful for describing how a business financed its resources.

How Does One Describe the Way a Business Financed Its