1. Introduction

Financing ratios provide information about the firm's financing policy as well as its ability to meet (future) financial obligations. The three common types of financing ratios are the debt ratios, the leverage ratios, and the coverage ratios.

  • The debt ratios measure the amount of debt in the firm's capital structure
  • The leverage ratios indicate the relative weights of debt and equity
  • The coverage ratios show whether the firm's operating performance is strong enough to service the financial obligations.