Which of the following conditions indicate a company has a relatively high level of financial risk?
A)A low times-interest-earned ratio
B)A low debt to assets ratio
C)A high return on equity
D)A high current ratio

Question

Quizplus · Accepted Answer

The times-interest-earned ratio is based on EBIT rather than net income because it is the amount of earnings before interest and taxes that is available to pay interest.
The higher the ratio,the less likely a company will be unable to make its interest payments.Higher times-interest-earned ratios suggest lower levels of risk.So,a low times-interest-earned ratio indicates that the company may be at risk of being unable to make required interest payments on its debt.

Which of the Following Conditions Indicate a Company Has a Relatively