When assessing the fixed-payment coverage ratio,
A) the higher its value, the higher is the firm's liquidity.
B) preferred stock dividend payments can be disregarded.
C) the lower its value the more risky is the firm.
D) the lower its value, the lower is the firm's financial leverage.

Question

Quizplus · Accepted Answer

A lower fixed-payment coverage ratio indicates that a firm has less ability to cover its fixed obligations, making it riskier.

When Assessing the Fixed-Payment Coverage Ratio