The Debt to Equity Ratio and Interest-Coverage Ratio for Vega

question 14

Multiple Choice

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

• A) The company is less able to pay its interest costs in 2020.
• B) The company is better able to pay its interest costs in 2020.
• C) The company has more debt outstanding in 2020.
• D) The company is less risky in 2020.

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Definitions:

Budgeting Formulas

Mathematical expressions or equations used to calculate, allocate, and manage financial resources over a specific period.

Direct Materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.

Units

A measure or quantity chosen as a standard to express the size, amount, or dimension of something.

Flexible Budget

A budget model that modifies its allocations to reflect changes in operational activity levels, improving accuracy in financial planning and performance evaluation.