What best explains why a firm's ratio of (long term debt/total capital is lower than the industry average,while the ratio of (income before interest and taxes/debt interest charges)is lower than the industry average.
A) The firm pays lower interest on long-term debt than the average firm
B) The firm has more short-term debt than average
C) The firm has a high ratio of (current assets/current liabilities)
D) The firm has a high ratio of (total cash flow/long term debt)
E) none of these

Question

Quizplus · Accepted Answer

The firm has more short-term debt than average, which would lower the long-term debt to total capital ratio but could result in a lower interest coverage ratio if short-term debt interest is high.

What Best Explains Why a Firm's Ratio of (Long Term