Question

Assume three companies in the same industry have the following number of times interest is earned ratios:

Collins Co. = 7.2 times
Dean Co. = 9.4 times
Edgar Co. = 13.9 times

Based on this information alone, which company appears to have the lowest financial risk?

Answer 1

Edgar Co. appears to have the lowest financial risk based on the number of times interest is earned ratios.

Step-by-step explanation:

To determine which company appears to have the lowest financial risk, we can compare their number of times interest is earned ratios. The higher the ratio, the lower the financial risk. In this case, the company with the highest ratio, Edgar Co. with a ratio of 13.9 times, appears to have the lowest financial risk. Collins Co. with a ratio of 7.2 times and Dean Co. with a ratio of 9.4 times have higher financial risks compared to Edgar Co.