Debt-assets ratio and times-interest-earned ratio of firm

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Reference no: EM131906749

1. Which of the following statements is true about the relationship between the debt/assets ratio and the times-interest-earned ratio (TIE) of a firm?

A) If the debt/assets ratio decreases, the TIE ratio will increase.

B) If the debt/assets ratio decreases, the TIE ratio will also decrease.

C) The debt/assets ratio and the TIE ratio are not related to each other.

D) The debt/assets ratio will always be equal to the TIE ratio.

E) If the debt/assets ratio increases, the TIE ratio will also increase.

2. Which of the following plays an important role in determining the capital structure of a firm?

A) Shareholders' expectations

B) Asymmetric information

C) Managerial attitudes

D) Reserve borrowing capacity

E) Bankruptcy-related costs

Reference no: EM131906749

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