Firm a Has a Total Debt to Total Assets Ratio

question 117

Multiple Choice

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0. Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0. Based on this limited information firm ________ appears to be in ________ debt management position than firm ________.

• A) A, better, B
• B) B, better, A
• C) A, a comparable, B
• D) B, lesser, A

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Definitions:

Adjustments

Changes made to accounts to record actual events that have occurred but haven't yet been recorded by the end of the accounting period.

Income Statement

A financial document that shows a company's revenues, expenses, and net income over a certain period of time.

Adjusted Trial Balance

A list of all the accounts of a company, showing the balance of each after adjustments have been made for journal entries, typically used in the preparation of financial statements.

Debit Column Total

Represents the total sum of all debit entries within a specific period in accounting, which are recorded on the left-hand side of the ledger.