Question
6. Daffodil Co.s EBIT was $200,000 in Year 1 and $150,000 in Year 2. Interest Expense was reported $40,000 in Year 1 and $25,000 in
6. Daffodil Co.s EBIT was $200,000 in Year 1 and $150,000 in Year 2. Interest Expense was reported $40,000 in Year 1 and $25,000 in Year 2. Which of the following statements about Daffodils Times-Interest-Earned Ratio is TRUE?
The times-interest-earned ratio in Year 2 is lower than in Year 1.
The company could not afford interest expense payments in Years 1 and 2.
The risk that Daffodil Co. will not be able to pay interest expense in Year 2 is lower than in Year 1.
Daffodil Co.s ability to pay-off the interest reduced in Year 2.
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International Financial Markets And The Firm
Authors: Piet Sercu, Raman Uppal
1st Edition
1861523548, 978-1861523549
