1. Debt-to-Equity Ratio: This measures the proportion of debt to shareholder equity. A higher ratio indicates more leverage and, consequently, higher financial risk.
2. Interest Coverage Ratio: This ratio measures a company’s ability to meet its interest payments. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio indicates better ability to service debt.
3. Debt Ratio: This ratio measures the proportion of a company’s assets that are financed by debt. It is calculated by dividing total debt by total assets.