Which of the following statements about debt management ratios is false? O A. Th

Question

Which of the following statements about debt management ratios is false? O A. There are two types of debt management ratios: capitalization ratios and coverage ratios. O B. Capitalization ratios use balance sheet data to measure the relative amount of debt financing used. O C. Coverage ratios use income statement data to measure the extent to which earnings (or cash flow) cover interest (or fixed financial) obligations. D. The debt ratio is a capitalization ratio, while the debt-to-equity ratio is a coverage ratio OE. The debt ratio is defined as total debt divided by total assets. Reset Selection hp

Explanation / Answer

correct answer is D, this statement is false since Debt/Equity ratio is capitalization ratio not coverage ratio.Coverage ratios focus on the income statement and measure the ability of a company to cover its debt payments. These ratios are useful in assessing a company’s solvency and, therefore, in evaluating the quality of a company’s bonds and other debt obligations

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