Which one of the following statements is correct? If the debt-to-assets ratio is greater than 0.50, then the debt-to-equity ratio must be less than 1.0. Long-term creditors would prefer the times-interest-earned ratio to be 1.4 rather than 1.5. The assets-to-equity ratio can be computed as 1 plus the debt-to-equity ratio. To realize the best risk and reward profile, financial leverage should be maximized.
Added by Jorge L.
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If the debt-to-assets ratio is greater than 0.50, then the debt-to-equity ratio must be less than 1.0. This statement is not necessarily true. The debt-to-assets ratio and debt-to-equity ratio are two different measures of a company's leverage. While a high Show more…
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