Concepts to Determine a Company's Financial Leverage and Liabilities

Quick ratio Fast ratio = (current assets - inventory) / current ratio of debt determines the ability of Ms & Co to fulfill its short-term obligations through its general current assets. The higher the speed ratio, the better the position of Ms & Co. The fast rate is considered an indicator of the strength of the Ms & Co currency. The most appropriate current ratio is 1, but it may vary from industry to industry. A company with a quick ratio below 1 can not currently lose its existing debt.

The company's financial leverage is the ratio of total liabilities to total assets. The lower the ratio, the better the company's performance, the lower the risk of failure and bankruptcy. The company's leverage ratio fell from -29.6% to -35.7% from 2009 to 2011. This indicates that the company's financial risk is low. Interest coverage ratio determines the ability to pay interest on outstanding debt obligations whose interest protection against the company in 2009-11 is continuing to decline. The company's ability to pay interest is questionable and the company is forced to pay a heavy burden by debt expenditure (Andrew, Damitio, Schmidgall 2007).

The D / E ratio is a measure of the company's financial leverage and is estimated by dividing the total debt by equity capital (Bruns 1992). This ratio represents the ratio of capital and liabilities used for procuring assets. It is important to understand the meaning of the numbers of the interest-bearing debt ratio. This number should be reduced as much as possible. Less debt than income means that the financial position of the company is excellent as there is additional funding for future targets. Referring to Appendix B, Tim Hortons' D / E ratio is 0.34 and has been stable for the past 6 years. This indicates that the company has the available funds to meet its financial goals.

The capital adequacy ratio is an indicator of the company's financial leverage calculated by dividing the total debt divided by equity capital. This shows the ratio of the equity capital to the debt that the company is using to raise assets. Almoiz sugar factory has lower D / E ratio than Layyah sugar mill and Chashma sugar branch. Long-term borrowings and capital are the way to determine corporate leverage. This ratio is calculated by dividing our long-term debt by shareholders' equity. The greater the leverage of the company, the higher the ratio. Generally, companies with high ratios are deemed to be at high risk because of their high debt and low capital. Overall, the Layyah sugar has a high D / E ratio compared to Almoiz and Chasma sugar stations in the past three years.