Answer (A) is correct . Because total assets will decline without any impact on sales, the total assets turnover ratio (sales/total assets) will increase. In addition, a reduced debt level should cause a reduction in annual interest payments, so the times interest earned ratio [EBIT/ interest] should increase.Answer (B) is incorrect because The times interest earned ratio will increase and the total assets turnover ratio will increase.
Answer (C) is incorrect because The times interest earned ratio will increase and the total assets turnover ratio will increase.
Answer (D) is incorrect because The times interest earned ratio will increase and the total assets turnover ratio will increase.
|
