Which of the Following Statements Is True About the Relationship

question 43

Multiple Choice

Which of the following statements is true about the relationship between the debt/assets ratio and the times-interest-earned ratio (TIE) of a firm? Consider everything else equal. 

• A)If the debt/assets ratio increases, the TIE ratio will also increase.
• B)If the debt/assets ratio decreases, the TIE ratio will increase.
• C)If the debt/assets ratio decreases, the TIE ratio will also decrease.
• D)The debt/assets ratio will always be equal to the TIE ratio.
• E)The debt/assets ratio and the TIE ratio are not related to each other.

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Definitions:

Foreign-Currency Exchange

The process of converting one currency into another currency, a key element in international trade and investment.

Tax Credit

is an amount by which taxpayers can reduce the taxes they owe to the government, directly offsetting their tax liability rather than reducing taxable income.

Investment Projects

Initiatives undertaken by individuals, companies, or governments to allocate capital in the expectation of generating returns over time.

Capital Flight

Capital flight refers to the sudden and large-scale outflow of financial assets and capital from a country due to economic or political instability.