A Reduction in Interest Expense, All Else Constant, Will Cause

question 354

Multiple Choice

A reduction in interest expense, all else constant, will cause a(n) :

• A) Decrease in the times interest earned ratio.
• B) Increase in the cash coverage ratio.
• C) Decrease in the long-term debt ratio.
• D) Decrease in the return on equity.
• E) Increase in the price earnings ratio.

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Definitions:

Predetermined Overhead Rate

An estimated charging rate used to apply manufacturing overhead costs to produced units, based on a selected activity base.

Predetermined Overhead Rate

A predetermined rate employed to allocate estimated manufacturing overhead costs to products, calculated before the period starts, using projected costs and activity levels.

Direct Labour Hour

A measure of labor that directly contributes to the production of goods, used in calculating labor costs and efficiency.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of a product, including costs related to indirect materials, indirect labor, and other indirect expenses.