The Debt to Equity Ratio and Interest Coverage Ratio for Lopez

question 26

Multiple Choice

The debt to equity ratio and interest coverage ratio for Lopez Corporation for the last two years are as follows: Which of the following conclusions could be made about Lopez Corporation?

• A) The company is less able to pay its interest costs in 2017.
• B) The company is better able to pay its interest costs in 2017.
• C) The company has more debt outstanding in 2017.
• D) The company is less risky in 2017.

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Definitions:

Quantity Demanded

The specific amount of a good or service consumers are willing to buy at a given price, holding other factors constant.

Elasticity Coefficient

A measure that quantifies the responsiveness of the quantity demanded or supplied of a good to a change in one of its determinants, such as price.

Relative Change

The measure of change in a variable relative to its initial value, often expressed as a percentage.

Inelastic

Describes a situation where the quantity demanded or supplied of a good or service changes by a relatively small amount in response to changes in its price.