Which One of the Following Statements Is Correct

question 51

Multiple Choice

Which one of the following statements is correct?

• A) If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0.
• B) Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5.
• C) The debt-equity ratio can be computed as 1 plus the equity multiplier.
• D) An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity.
• E) An increase in the depreciation expense will not affect the cash coverage ratio.

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Definitions:

Deregulation

The process of removing or reducing state regulations, typically in the economic sphere, to encourage more efficient and competitive markets.

S & L Institutions

Savings and Loan institutions, which are financial establishments focusing on accepting savings deposits and making mortgage loans.

Antitrust Suits

Legal actions taken against companies or entities to break up monopolies or to prevent anti-competitive practices, aiming to promote fair competition for the benefit of consumers.

Ivan Boesky

A former American stock trader who became infamous in the 1980s for his role in a major insider trading scandal.