Liquidity, Solvency, and Leverage Ratios

Question 1

Firms with high degrees of financial leverage would be best characterized as having

Answer 1

High debt-to-equity ratios.

Question 2

If a current ratio is less than 1.0, what improves the ratio?

Answer 2

a transaction that results in equal increases in the numerator and denominator

Question 3

Times interest earned formula (interest coverage ratio)

Answer 3

income available for paying interest / annual interest expense