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 = 0.8; debt-equity ratio = 0.8
D)Cash coverage ratio = 2.6; debt-equity ratio = 0.3
E)Cash coverage ratio = 0.5; total debt ratio = 0.2

Question

Quizplus · Accepted Answer

A higher cash coverage ratio and a lower debt-equity ratio indicate better financial health and lower risk, making it more attractive for lenders.

You Would Like to Borrow Money Three Years from Now