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What does a financial level index greater than one indicate about a firm? The unsuccessful use...

What does a financial level index greater than one indicate about a firm?

The unsuccessful use of financial level.

More debt financing than equity financing.

Operating returns more than sufficient to cover interest payments on borrowed funds.

An increased level of borrowing.
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Answer #1

Answer: Option "c" is correct, that says, "Operating returns more than sufficient to cover interest payments on borrowed funds".

An index is a barometer or measure of the performance of something. Financial level index is a measurement of firm's performance, if it is greater than one, it means company has enough operating income and it can very well pay the interest on loan. Interest is a burden that a company needs to pay out of the operating profit. If company has higher operating profit, it can easily pay its interest expenses.

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