Which of the following is a key characteristic of leverage ratios?

Leverage ratios are primarily concerned with assessing a company's capital structure, specifically how much debt the company is using in relation to its equity. These ratios provide insight into the level of financial risk a company is facing based on its reliance on borrowed funds to finance its operations and growth. A higher leverage ratio often indicates that a company is taking on more debt, which can amplify both potential gains and potential losses, thereby maturing its financial risk profile.

A characteristic of leverage ratios is their ability to empower stakeholders, including investors and creditors, to analyze the balance between debt and equity financing within the company. This analysis is crucial because it informs decisions about investment, lending, and the overall financial stability of the organization.