A High Cash Total Debt Coverage Ratio Could Signal a Long-Term

question 56

True/False

A high cash total debt coverage ratio could signal a long-term solvency problem.

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Definitions:

Liquidation

The process of winding up a company's financial affairs by selling assets to pay off liabilities, with any surplus distributed to shareholders.

Preference Shares

Preference shares are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued.

Ordinary Shares

Shares that have no specific rights to any distributions of profit by the company. Ordinary shareholders obtain what is left after all other parties’ claims have been met.

Liquidation

The process of converting assets into cash or paying off liabilities in order to close down a business.