a company is more likely to be considered solvent if it has a ____ debt-equity ratio and a _____ cash coverage ratio

a company is more likely to be considered solvent if it has a debt-equity ratio and a _ cash coverage ratio

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 12MC: The cost of equity is _______. A. the interest associated with debt B. the rate of return required...

See similar textbooks

Related questions

Q: Which of the following businesses are most exposed to interest rate risk? * A. A company with…

A: Interest means amount needs to be paid on regular basis in exchange of loan amount borrowed.…

Q: How to use Return on Equity ratio to determaine whether a company needs to issue stocks or bonds to…

A: Return on equity is a ratio which is used by companies to measure financial performance and helps…

Q: To what extent a company uses debt financing (or financial leverage) in business operations?

A: The question is based on the concept of capital structure of a company, the capital structure is a…

Q: Discuss the factors that are likely to influence the desired level of cash of a companyb. Outline…

A: Cash is related to the accounting term which is cash equivalents, that refers to the assets which…

Q: The current ratio is O a solvency measure that indicates the margin of safety for bondholders O…

A: Note: Since you have asked multiple question, we will solve the first question for you. If you want…

Q: If a company wanted to maximize EPS (Earning per Share), which form of financing might they likely…

A: Answer: Earnings Per Share (EPS) measures Company’s profitability. It is calculated by using below…

Q: Discuss the factors that are likely to influence the desired level of cash of a company

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: what is the relationship between management of business finance and company`s financial performance…

A: Managing Business Finance means to utilize the funds of the business out of various means such as…

Q: What is the blend of long-term financial sources used to finance the firm which may include debt,…

A: Long term financial sources could be debt, equity or preferred stock. The blend of these is required…

Q: ___ indicate the ability of the firm to meet its short-term financial obligations. a.…

A: Ratio measurement is in terms of Financial world, depicts that a sole accounting data by itself may…

Q: Which of the following pairs of financial statement analysis tool will be given more emphasis by a…

A: Solution:- Granting trade credit or selling on account to a new client are short term decisions and…

Q: it better to finance a company thru debt or thru equity? Why? What are the downside and upside to…

A: A business can raise funds predominantly either by Issuing Equity, or Borrowings Loans, Issuing…

Q: Capital structure of a company is more appropriately calculated using the: book value of debt and…

A: Capital structure of a company consists of debt, equity or any other source of finance used to…

Q: Why might it make sense for a mature, slow-growth company to have a high debt ratio

A: Mature, Slow-growth Company: These are companies established in the industry, having a strong…

Q: Explain the risk of investing in a company based on

A: Debt to equity ratio indicates that how much Debt is company have and how much company is having…

Q: one of the following is true regarding the business and financial risk: Select one: a. the business…

A: Business risk refers to that type of risk which involves the decline in profitability and stability…

Q: What does issuing equity instea of debt signal about the financial health of a company?

A: Debt signaling is a theory which helps in determining the movement of stock prices. When a company…

Q: Discuss the usefulness of the DuPont Analysis in analyzing the drivers of companies’ profitability.…

A: Ratio analysis is a tool used by the financial analyst to measure the financial performance of the…

Q: Is there an easily identifiable debt-equity ratio that will maximize the value of a firm?

A: Theoretically, there exists a debt equity ratio at which the value of the firm gets maximized.…

Q: An investor worried about a company’s long-term solvency would most likely examine its:C .…

Q: refers to the way a company finances itself through some combination of loans, bond sales, preferred…

A: The mix of equity and debt in a business organization is known as the capital structure of the…

Q: What are the charateristics of Debt financing and Equity fianancing? If a company wanted to maximize…

A: Answer: Usually for a company there are various sources available to raise funding. Such a issuing…

Q: Explain how ratio analysis can be used to evaluate the business ability to pay its debt Which…

A: Ratio Analysis: It is a technique by which the financial position of a company is analyzed. This…

Q: For purposes of measuring a firm’s leverage, should preferred stock be classified as debt orequity?…

A: We cannot categorize preferred stock as entirely debt or equity. It is a mixture and is alike bonds…

Q: explain further the principle of self-liquidating debt and how can it be used to manage a firm's…

A: Debt is referred as an obligation, which requires one party that is debtor for making the payment or…

Q: Do you agree with each of the following statements? Explain. •EBITDA makes companies with…

Q: Is there an easily identifiable debt-equity ratio that will maximize the value of a firm? Why or why…

A: It is not easy to identify a debt-equity ratio, which would increase the firm’s value.

Q: Which of the following is a disadvantage of long-term debt as a means of company financing? Group…

A: Funds are very important and necessary for smooth running of a business organization. A business has…

Q: According to DuPont analysis, the impact of debt on a company's profitability is measured by the.…

A: Dupont analysis is a framework to analyze Fundamental performance of a corporation.

Q: The higher the debt-to-equity ratio, the less debt a company is using co finance its assets. O True…

A: Debt to equity ratio is an important leverage ratio that we use in the world of accounting and…

Q: A company has an equity multiplier of 3.2, and its assets are financed with some combination of…

A: The debt to asset ratio is a leverage ratio that indicates the percentage of assets that are being…

Q: What are some of the measures used to evaluate the financial stability of a company?

A: When a firm pays off all its expenses, liabilities and is running smoothly with bright future…

Q: articipate in the ownership of the firm. (b) Investors in debt are paid interest. (c) Debt is more…

A: Debt capital consists of the securities that represent lenders or financial creditors to the firm.…

Q: What is WACC? Why do firms compute it? What happens to WACC when the debt level of a firm changes?

A: WACC is the weighted average cost of capital. It is the average cost of raising capital both equity…

Q: How do we use debt to equity ratio to evaluate business performance?

A: debt to equity ratio is a ratio used to measure the solvency of a business . Debt to equity ratio is…

Q: A. Other things being equal, which company appears to have the better liquidity position in terms of…

A: Financial ratios are those which provide a summary of the accounts of a company and helps an…

Q: Describe the debt-to-equity ratio and explain how creditors and owners use this ratio to evaluate a…

A: Ratio analysis is a method of analyzing a company's liquidity, profitability, and operational…

Q: Explain how the use of more debt in the company affects return on equity (ROE).

A: ROE or Return on Equity relates to portion of equity capital invested by owner that are generally…

Question

a company is more likely to be considered solvent if it has a ____ debt-equity ratio and a _____ cash coverage ratio

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

An investor worried about a company’s long-term solvency would most likely examine its:C . debt-to-equity ratio
Explain how the use of more debt in the company affects return on equity (ROE).
Which type of financial ratio tells you how well a company can cover its long-term liabilities? a) efficiency b) liquidity Oc) solvency O d) profitability e) profitability and efficiency
The cost of equity is ________. a.equal to the amount of asset turnover b.the interest associated with debt c.the weighted average cost of capital d.the rate of return required by investors to incentivize them to invest in a company
Indicate whether the following statement is true or false. Provide the relevant explanations. The higher the proportion of equity in a company’s overall capital structure, the higher return required by its debtholders. (Explain your reasoning – in your explanation, provide a numerical example supporting your answer.)
The ability of a company to meet its long-term obligations is termed: A) Profitability B) Solvency C) Efficiency D) Liquidity
If a company wanted to maximize EPS (Earning per Share), which form of financing might they likely consider, debt or equity? Explain
Which is easier to calculate directly, the expected rate of return on the assets of a firm or the expected rate of return on the firm’s debt and equity?
If your goal is to determine how effective a firm in managing its assets, you would examine O Profit margin, Current ratio, Debt ratio O Price-earnings ratio, Times-interest-earned ratio, Operating Margin O Inventory turnover, Receivables turnover, Assets turnover O Quick ratio, Debt ratio, Times-interest-earned ratio
The cost of equity is ________. Group of answer choices A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
Which of the following is true regarding the debt to equity ratio? a. The debt to equity ratio is a stringent measure of liquidity. b. The debt to equity ratio measures the productivity and desirability of the equity investment. c. The debt to equity ratio measures management’s ability to productively employ all its resources. d. The debt to equity ratio measures the capital structure of the entity. would D be the correct answer?
Explain the risk of investing in a company based on debt-equity-ratio.