Which One of These Statements Is Correct Regarding Ratio Analysis

question 104

Multiple Choice

Which one of these statements is correct regarding ratio analysis as a predictor of bankruptcy?

• A) As early as four years before they went bankrupt, failing firms were earning a higher return on assets than firms that survived.
• B) On average, failing firms have a lower ratio of liabilities to assets than surviving firms.
• C) Failing firms have a lower EBITDA to total liabilities ratio than surviving firms.
• D)Firms with a total debt to total assets ratio of 75% or less tend to survive rather than fail.

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Definitions:

Product Costs

The costs that are directly associated with the production of goods or services, including labor, materials, and manufacturing overhead.