1. which of the following debt management ratios is the most inclusive for measu

Question

1. which of the following debt management ratios is the most inclusive for measuring the degree to which a company relies on outsiders for financing?

a. Non-current debt-to-total assets ratio

b. Times interest earned ratio

c. Debt-to-equity ratio

d. Non-current debt-to-equity-ratio

2. Amethyst Company paid off a $100000 two-year note payable. The effect of this transaction is that the:

a. current ratio increased

b. both quick and current ratios decreased

c. debt-to-equity ratio increased

d. earnings per share increased

3. In considering equity and debt financing, which of the following statements is generally true?

a. The lower the measure of the non-current debt-to-equity ratio, the greater the likelihood the company will have difficulty in meeting its obligation in some future period

b. The higher the measure of the debt-to-equity ratio the greater the likelihood the company will have difficulty in meeting its obligation in some future period

c. Interest and dividend payments are required to be made by the issuing company

d. Most companies prefer to have no debt and rely exclusively on equity financing

Thanks for your help!

Explanation / Answer

Answer 1. c. Debt-to-equity ratio

Debt to equity ratio, is renowed ratio in the financial markets, is defined as a ratio of debts to equity. It is often calculate to have an idea about the long term financial solvency of a business.

Answer 2. b. both quick and current ratios decreased

Answer 3. b. The higher the measure of the debt-to-equity ratio the greater the likelihood the company will have difficulty in meeting its obligation in some future period

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