5. More on debt management ratios AaAa The extent of financial leverage in a firm Debt ratios measure the proportion of total assets financed by a firm's creditors Hackworth Co. has a debt-to-equity ratio of 3.40, compared to the industry average of 4.08. Its competitor Markum's Co., however, has a debt-to-equity ratio of 2.72. Based on what debt-to-equity ratios imply, which of the following statements is true? O Hackworth Co. has greater financial risk as compared to Markum's Co. but lower than the average financial risk in the industry O Hackworth Co. has higher creditworthiness as compared to Markum's Co. O Markum's Co. has a greater risk of bankruptcy than Hackworth Co. O Markum's Co.'s creditors face higher risk than the average financial risk in the industry Suppose the stock price of Hackworth Co. falls by 10%, what impact will it have on its market-to-debt ratio if nothing changes in the company's balance sheet? O The market debt ratio will decrease, reflecting an increase in the financial risk of the company O The market debt ratio will increase, reflecting an increase in the financial risk of the company O The market debt ratio will increase, reflecting a decrease in the financial risk of the company O The market debt ratio will decrease, reflecting a decrease in the financial risk of the company Data Collected (Millions of dollars) Hackworth Co. reported the following figures in its annual report. EBITDA Interest payments Principal payments Lease payments Year 1 $900 90 $72 $41 Based on the information, Hackworth Co. has the ability to cover its fixed financial charges times