Which of the following would be a sign that a company is overextended in its debt?
A)A low debt ratio compared to the industry average
B)A debt-to-net worth ratio of 0.12 to 1
C)A times-interest-earned ratio that is far below the industry average
D)A high inventory turnover ratio

Question

Quizplus · Accepted Answer

A times-interest-earned ratio that is far below the industry average indicates that the company is struggling to meet its interest payments on its debt. This is a signal that the company is overextended in its debt and may have difficulty managing its financial obligations in the future. A low debt ratio and a high inventory turnover ratio are generally seen as positive indicators of a company's financial health, while a debt-to-net worth ratio of 0.12 to 1 is within a reasonable range and may not necessarily indicate that a company is overextended in its debt.

Which of the Following Would Be a Sign That a Company