2. Which one of the following ratios is used to calculate the interest coverage ratio?

A) Pretax profit/EBIT

B) EBIT/Interest expense

C) EBIT/Sales

D) Net profit/Interest expense

3. Which of the following is correct?

I. ROE is less than ROA if debt/equity ratio is between 0 and 1

II. ROE increases with profit margin

III. Higher ROE means lower ROA, holding everything else equal

IV. ROA always increases with the leverage

A) II only

B) I and II only

C) III and IV only

D) I, II, and III only