Which One of the Following Statements Is Correct

question 51

Multiple Choice

Which one of the following statements is correct?

• A) If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0.
• B) Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5.
• C) The debt-equity ratio can be computed as 1 plus the equity multiplier.
• D) An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity.
• E) An increase in the depreciation expense will not affect the cash coverage ratio.

---

Definitions:

Direct Labor Cost

The total cost of workforce directly involved in the production of goods or services, excluding indirect labor.