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Question
Nelson Industries has a higher debt ratio than Butler, Inc., and Nelson also has a higher times interest earned ratio than Butler. If Nelson and Butler both have the same amount of total assets, thenA) Nelson must have higher operating income than Butler.
B) if both companies have the same operating income, Butler must be paying a higher interest rate on its long-term debt than Nelson is paying.
C) Nelson may have more non-interest bearing liabilities, such as accounts payable, than Butler has.
D) if both companies have the same operating income, a mistake was made in the calculations because the company with a higher debt ratio must have a lower times interest earned ratio.
Answer
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