In assessing solvency, it is better if the cash total debt coverage and debt to total assets ratios are
A)high and low, respectively.
B)low and high, respectively.
C)both high.
D)both low.

Question

Quizplus · Accepted Answer

A high cash total debt coverage ratio indicates that the company has enough cash flow to cover its debt obligations, which is a positive sign for solvency. On the other hand, a low debt to total assets ratio indicates that the company has lower debt levels in relation to its assets, which is also a positive sign for solvency. Therefore, choice A is the best answer.

In Assessing Solvency, It Is Better If the Cash Total