Which of the Following Is an Accurate Statement Regarding a Company's

question 60

Multiple Choice

Which of the following is an accurate statement regarding a company's ability to meet its long-term debt obligations?

• A) If the debt-to-equity ratio is too high, it may indicate that the company has used up its borrowing capacity.
• B) If the debt-to-equity ratio is too high, it may mean that available leverage is not being used to the owners' benefit.
• C) The times interest earned ratio indicates if a company can make its principal and interest payments.
• D) The key ratios that are used to measure a long-term solvency are debt to equity, return on assets, and times interest earned.

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Definitions:

Thrust Fault

A type of geological fault where one block of the earth's crust is pushed up and over another, typically at a low angle, due to compressional forces.

Normal Fault

A normal fault is a type of fault where the hanging wall slides downward relative to the footwall due to tensional forces.

Sedimentary Layers

Strata or layers of rock that have been formed from sediment deposition over vast periods of time.

Block Diagram

A diagram that portrays in three dimensions the shape of the land surface and the subsurface distributions of rock units, folds, faults, and other geologic features.