Which of the following ratios indicates a company's financial leverage?

The ratio that indicates a company's financial leverage is the debt to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio. This ratio measures the amount of debt a company has in relation to its operational earnings, providing insight into how much debt is being utilized to generate earnings before any ownership costs or tax expenses are taken into account. A higher debt to EBITDA ratio generally indicates greater financial leverage, implying that the company is relying more heavily on borrowed funds to finance its operations.

In contrast, other ratios such as ROA (Return on Assets) focus on how efficiently a company is using its assets to generate profits. The gross profit margin emphasizes the profitability of the company's core activities by looking at sales and cost of goods sold, without considering the impact of debt. The debt to total equity ratio, while related to leverage, specifically assesses the proportion of debt in relation to shareholders' equity rather than the operational earnings generated to service that debt. Therefore, the debt to EBITDA ratio is the most direct indicator of financial leverage among the options provided.