Which of the following transactions or events would have no immediate effect on the times interest earned ratio but will cause debt/equity ratio to decrease?
A) issuing new debt
B) issuing new equity
C) having a stock split
D) recording large contingent liability for lawsuit

Question

Quizplus · Accepted Answer

Issuing new equity would increase the equity portion of the debt/equity ratio, therefore decreasing the overall ratio. However, it would not affect the times interest earned ratio, which takes into account a company's ability to meet its interest payments with its earnings. A, C, and D would not affect the debt/equity ratio in the given scenario.

Which of the Following Transactions or Events Would Have No