Question

An investor views a high debt-to-equity ratio and low times-interest-earns ratio as favorable signs of a company's ability to meet its long-term obligations. True False

Answer 1

Answer:

False

Explanation:

Instead the reverse is the case. A high times-interest-earned ratio and a low debt-to-equity ratio is viewed by an investor as favorable signs of a company's ability to meet its long-term obligations.  When the two measures are combined and they look favorable, investors are attracted to invest in the said company.  So companies should work to ensure that the times-interest-earned ratio is high enough to be attractive to investors.