A firm with total debt to total assets of 50% and an interest coverage ratio of 0.5 times would appear to be safely utilizing financial leverage.

Question

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A firm with a debt to assets ratio of 50% means that half of their assets are financed by debt, which is not necessarily considered safe utilization of financial leverage. Additionally, an interest coverage ratio of 0.5 times means that the firm is only generating enough operating income to cover half of their interest expense, which is not a good indication of financial stability.

A Firm with Total Debt to Total Assets of 50