Which of the Following Is Correct

question 2

Multiple Choice

Which of the following is correct?

• A)The times interest earned ratio is considered a better test of the ability to cover interest charges than the cash coverage ratio.
• B)The debt-to-equity ratio shows the relative proportion of total assets financed by debt.
• C)The higher the debt-to-equity ratio, the higher the potential return to the stockholders if return on assets (ROA) exceeds the after tax cost of interest.
• D)The cash coverage ratio compares the cash generated by a company to its cash obligations for the prior perioD.A high debt-to-equity ratio means that there is a lot of debt financing relative to equity financing.If the ROA exceeds the after-tax cost of financing, the excess represents a return to stockholders, which increases the return on their investment.

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