Which of the Following Statements Regarding the Debt Servicing Capacity

question 66

Multiple Choice

Which of the following statements regarding the debt servicing capacity of a company is incorrect?

• A) The debt to gross cash flow ratio is an indicator of debt servicing capacity.
• B) The debt to gross cash flow ratio indicates years required for cash flows to repay total debt.
• C) The interest cover ratio is an indicator of a company's capacity to service debt.
• D) The lower the interest cover ratio, the greater the company's ability to cover interest commitments.

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Definitions:

Generalizing

Making broad statements or conclusions based on limited data, often extending a notion from specific instances to broader contexts.

Change Initiative

Efforts undertaken by an organization to make significant changes in its operations, culture, or strategy to improve its performance.

Organizational Culture

The shared values, beliefs, norms, and practices that shape the social and psychological environment of a business organization.

Overburdened

Experiencing excessive stress or demands that surpass an individual's or system's capacity to cope effectively.