Question

Ch 04, blueprint probs, analysis of financial statements.

4: Analysis of Financial Statements: Debt Management Ratios

Debt management ratios measure the extent to which a firm uses financial leverage and the degree of safety afforded to (1)(creditors, analysts, shareholders)They include the: (1) Debt-to-capital ratio, (2) Times interest earned ratio (TIE), and (3) EBITDA coverage ratio. The first ratio analyzes debt by looking at the firm's (2)(cashflow statement, income statement, balance sheet), while the last two ratios analyze debt by looking at the firm's (3)(cashflow statement, income statement, balance sheet) . The debt-to-capital ratio measures the percentage of funds provided by (4)(debtholders, analysts, shareholders). High debt ratios that exceed the industry average may make it costly for a firm to borrow additional funds without first raising more (5)(debt, preferred, equity). The times interest earned ratio measures the extent to which (6)(total, operating, net) income can decline before the firm is unable to meet its annual (7)(depreciation, rent, interest) payments. EBIT is used as the numerator because (8)(depreciation, rent, interest) is paid with pretax dollars—the firm's ability to pay (9)(depreciation, rent, interest) is not affected by taxes. This ratio is more complete than the TIE ratio because it recognizes that depreciation and amortization are not (10)(deductible, cash, real) expenses, so these amounts are available to service debt, and lease payments and principal repayments are fixed payments. Please select which bolded statement is correct, thank you!

Answer 1

1. Creditors.

2. Balance Sheet.

3. Income Statement.

4. Debtholders.

5. Equity.

6. Operating.

7. Interest.

8. Interest.

9. Interest.

10. Cash.