Jones Company has long-term debt of $1,000,000,while Smith Company,Jones' competitor,has long-term debt of $200,000.Which of the following statements best represents an analysis of the long-term debt position of these two firms?
A)Smith Company's times interest earned should be lower than Jones.
B)Jones obviously has too much debt when compared to its competitor.
C)Jones should sell more stock and use less debt.
D)Smith has five times better long-term borrowing ability than Jones.
E)Not enough information to determine if any of the answers are correct.

Question

Quizplus · Accepted Answer

The amount of long-term debt alone does not provide enough information to accurately assess the financial health, interest coverage, or borrowing ability of Jones Company or Smith Company. Other financial metrics and context are needed for a comprehensive analysis.

Jones Company Has Long-Term Debt of $1,000,000,while Smith Company,Jones' Competitor,has