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Flashcards in Leverage Ratios and Analysis Deck (4):

Debt-Equity Ratio vs. Debt Ratio

Debt-Equity Ratio shows the proportion of financing provided by creditors (DEBT) and shareholders (EQUITY)

Debt Ratio focuses only on proportion of liquidation available to creditors (Bondholders) and shareholders (EQUITY). Secured creditors like bondholders are paid first.


Debt-Equity Ratio

Total Debt / Total SHE


Debt Ratio

Total Liabilities / Total Assets


Affirmative covenant

A covenant that requires a corporation to maintain, at all times, some minimum level of working capital