Which of the following is correct?
A)The times interest earned ratio is considered a better test of the ability to cover interest charges than the cash coverage ratio.
B)The debt-to-equity ratio shows the relative proportion of total assets financed by debt.
C)The higher the debt-to-equity ratio,the higher the potential return to the stockholders,but also the higher risk to stockholders.
D)The cash coverage ratio compares the cash generated by a company to its cash obligations for the prior period.

Question

Quizplus · Accepted Answer

The debt-to-equity ratio indicates the balance between debt financing and equity financing used by a company. A higher ratio suggests that a company is taking on more debt, which can lead to higher returns for stockholders due to the leverage effect, but it also increases the financial risk if the company cannot meet its debt obligations.

Which of the Following Is Correct