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 = .8; debt-equity ratio = .8
D)Cash coverage ratio = 2.6; debt-equity ratio = .3
E)Cash coverage ratio = .5; total debt ratio = .2

Question

Quizplus · Accepted Answer

A higher cash coverage ratio indicates better ability to cover interest expenses, and a lower debt-equity ratio suggests less reliance on debt, both of which are favorable for obtaining financing.

You Would Like to Borrow Money Three Years from Now