Which of the following ratios measure a company's capital structure?
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A. B. C. D.C
Out of the four options provided, only one ratio measures a company's capital structure, and that is the leverage ratio (C).
A leverage ratio is a financial ratio that measures the amount of debt a company has relative to its assets, equity, or earnings. It is used to assess a company's financial leverage or degree of indebtedness.
By analyzing the leverage ratio, investors can determine how much of a company's funding comes from debt, which can help them evaluate the company's risk level. Generally, a higher leverage ratio indicates a greater amount of financial risk, while a lower ratio indicates a lower level of financial risk.
On the other hand, the price-to-sales ratio (A) is used to value a company by dividing its market capitalization by its revenue. The price-to-book value ratio (B) compares a company's market capitalization to its book value, which is the value of its assets minus its liabilities. These ratios do not provide information about a company's capital structure.
Lastly, the debt coverage ratio (D) measures a company's ability to pay its debts by comparing its net operating income to its debt service obligations. It is not directly related to a company's capital structure.
In summary, the only ratio that measures a company's capital structure is the leverage ratio (C).