What best explains why a firm's ratio of long-term debt/total capital is lower than the industry average, while the ratio of income before interest and taxes/debt interest charges is lower than the industry average
A)The firm pays lower interest on long-term debt than the average firm.
B)The firm has more short-term debt than average.
C)The firm has a high ratio of current assets/current liabilities.
D)The firm has a high ratio of total cash flow/long term debt.
E)None of the options

Question

Quizplus · Accepted Answer

The firm is using more short-term debt, possibly to finance fixed assets, than the average firm.The coverage ratio includes only interest on long-term debt.

What Best Explains Why a Firm's Ratio of Long-Term Debt/total