You Would Like to Borrow Money Three Years from Now

question 13

Multiple Choice

You would like to borrow money three years from now to build a new building.In preparation for applying for that loan,you are in the process of developing target ratios for your firm.Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

• A)Times interest earned = 1.7; debt-equity ratio = 1.6
• B)Times interest earned = 1.5; debt-equity ratio = 1.2
• C)Cash coverage ratio = 0.8; debt-equity ratio = 0.8
• D)Cash coverage ratio = 2.6; debt-equity ratio = 0.3
• E)Cash coverage ratio = 0.5; total debt ratio = 0.2

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Definitions:

Overexertion

The result of physical or mental effort exceeding one's capacity, leading to stress or health issues.

Back Strain

An injury to the muscles or tendons in the back due to overstretching or tearing.

Hypoglycemia

Low blood sugar.

Insulin Shock

A severe form of hypoglycemia caused by an excess of insulin in the bloodstream, leading to symptoms like confusion, tremors, and in severe cases, coma.