In 2014, H Co's Times Interest Earned Ratio Was 2

question 21

Multiple Choice

In 2014, H Co's times interest earned ratio was 2.51 while T Co's ratio for that year was .80. Which of the following statements is false?

• A) H Co.'s ratio shows an extra margin of risk in case profitability deteriorates.
• B) T Co's ratio is very low and they present high risk to their creditors and investors.
• C) Since H Co's is actively pursuing growth through investment in other companies, its ratio may improve once those investments begin to generate additional net earnings.
• D) H Co's ratio appears to provide adequate coverage of interest from its present net earnings.

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Definitions:

Terminal Value Estimates

Calculations used to predict the future value of an investment or company beyond the forecast period, often considered in discounted cash flow analyses.

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A period characterized by a surge in mergers and acquisitions, typically due to economic and technological developments.

Hostile Takeovers

The acquisition of one company by another without agreement or approval from the target company's management.

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.