The debt to equity ratio and times-interest-earned ratio for Conway Corporation for the last two years are as follows: $$\begin{array} { l r r }
& 2011 & 2010 \
\text { Debt to equity } & .34 & .35 \
\text { Times-interest-earned } & 4.2 \times & 5.5 \times
\end{array}$$
Which of the following conclusions could be made about Conway Corporation?
A)The company is less able to pay its interest costs in 2011.
B)The company is better able to pay its interest costs in 2011.
C)The company has more debt outstanding in 2011.
D)The company is less risky in 2011.

Question

The debt to equity ratio and times-interest-earned ratio for Conway Corporation for the last two years are as follows: $$\begin{array} { l r r } 
& 2011 & 2010 \
\text { Debt to equity } & .34 & .35 \
\text { Times-interest-earned } & 4.2 \times & 5.5 \times 
\end{array}$$
Which of the following conclusions could be made about Conway Corporation?
A)The company is less able to pay its interest costs in 2011.
B)The company is better able to pay its interest costs in 2011.
C)The company has more debt outstanding in 2011.
D)The company is less risky in 2011.

Quizplus · Accepted Answer

The times-interest-earned ratio decreased from 5.5 in 2010 to 4.2 in 2011, indicating the company is less able to cover its interest expenses in 2011 compared to 2010.

The Debt to Equity Ratio and Times-Interest-Earned Ratio for Conway