Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.Based on this limited information firm ________ appears to be in ________ debt management position than firm ________.
A)A, better, B
B)B, better, A
C)A, a comparable, B
D)none of the above

Question

Quizplus · Accepted Answer

Firm B has a higher interest coverage ratio, indicating it can cover its interest expenses more comfortably than Firm A, despite having a higher debt ratio. This suggests Firm B is in a better debt management position.

Firm a Has a Total Debt to Total Assets Ratio