Question
KRJ Enterprises reported a steady debt ratio over the past two years and a significant decrease in its interest coverage ratio from 8.3 to 3.9.
KRJ Enterprises reported a steady debt ratio over the past two years and a significant decrease in its interest coverage ratio from 8.3 to 3.9. What is the most likely conclusion an analyst would make about the company's solvency or creditworthiness?
With a steady debt ratio and a decreasing interest coverage ratio, the company appears to be better able to meet its debt obligations and would likely be considered more creditworthy. | ||
Given the mixed signals of a steady debt ratio with a falling interest coverage ratio, an analyst would likely need to carefully examine many other ratios before making any initial conclusions about the company's creditworthiness. | ||
Debt ratios and coverage ratios have very little to do with assessing a company's solvency or creditworthiness so one could not make any conclusions about the company's situation. | ||
With a steady debt ratio and a decreasing interest coverage ratio, the company appears to be less able to meet its debt obligations and would likely be considered less creditworthy. |
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