The Company's Leverage Ratio Has Moved from 15

question 1

Multiple Choice

The company's leverage ratio has moved from 15.2% to 32%. Its return on equity ratio has also moved up, from 20.5% to 45.3%. Its times interest earned ratio has dropped to 3.5. Which of the following is the best statement to describe the company?

• A) Is not in a risky financial position
• B) Is depending on debt to finance its expansion
• C) Cannot pay the interest on its long-term debt
• D) Is depending on equity to finance its expansion
• E) Has a sizable cushion to pay the interest on its debt

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Definitions:

Waist-To-Hip Ratio

A measure of fat distribution, calculated by dividing the circumference of the waist by the circumference of the hips.

High-Risk Category

A classification used to indicate a heightened potential for developing a disease or facing a specific health danger.

Body Weight

The total mass or weight of an individual’s body.

Body-Fat Percentage

A measure of the proportion of fat to the total body weight.