Question
Why can return on equity improve even when operating performance does not?
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Answer
Higher financial leverage can boost equity returns.
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Question
Why is interest coverage a useful warning signal for long-term solvency?
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Answer
It shows how easily EBIT can cover interest expense.
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Question
Why can a rising gross profit margin indicate improved business quality?
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Answer
It suggests stronger pricing power or lower production costs.
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Question
How does debt-to-capital differ from debt-to-equity in what it emphasizes?
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Answer
Debt-to-capital uses total permanent capital; debt-to-equity compares debt only to equity.
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