A lending institution would prefer that a firm have a _____debt-equity ratio and a______ times interest earned ratio.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower

Question

Quizplus · Accepted Answer

A lending institution would prefer a firm to have a lower debt-equity ratio because this indicates the firm is less risky and not overly reliant on debt for financing. A higher times interest earned ratio is preferred as it shows the firm is more capable of meeting its interest obligations from its earnings, indicating better financial health and lower risk of default.

A Lending Institution Would Prefer That a Firm Have a _____Debt-Equity