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(TCO D) Which one of the following is not a capital structure ratio? Cash flow to...

(TCO D) Which one of the following is not a capital structure ratio? Cash flow to debt Current asset turnover Net asset financing Debt service coverage Long-term debt to net assets

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Answer #1

From the given ratios, Current asset turnover ratio is not a part of capital structure ratio.

Capital structure means how long a business can be financed using debentures, share capital and reserve & surplus.

The capital structure ratio is defined as those ratio which defines how long a firm can run by making stability between debt and capital and to ensure that there is adequate capital with firm to repay periodic interest and at maturity the principal amount. Examples are: Debt to equity ratio, Long-term debt to net assets, debt to total assets ratio, etc.

Current assets turnover ratio measures firm's ability to work by generating sales out of current assets like, cash, bank and accounts receivables.

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