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Which of the following statements is incorrect? If the quick ratio is the same as the current ratio; it will indicate that inventories are higher than they should be. The times interest earned ratio measures the ability of the firm to pay its interest obligations by comparing earnings before interest and taxes (EBIT) to interest expense. All the answers are correct except one. Total Debt Ratio = Total Liabilities / Total Assets. Accounts receivable can easily be corverted into cash with only small . discounts and therefore it is considered as liquid asset. Which of the following statements is correct? Coverage financial ratios are similar to liquidity ratios in that they describe the ability of a firm to pay certain expenses. All the answers are correct. Generally, higher leverage ratios are preferred to low amount of debt but high debt levels are coinsidered to be a good thing. Low inventory turnover is considered to be good because it means that the opportunity costs of holding inventory are low, but if it is too low the firm. may be risking inventory outages and the loss of cuistomers. Average Collection Period = Accounts Payables / (Depreciation/360)