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Basic Question 8 of 8
Which ratio is the most important factor to indicate that a company has plenty of financial capacity to add more debt if there is an investment reason?
B. A big cash flow interest coverage ratio.
C. A big operating cash flow to net income ratio.
A. A big profit margin.
B. A big cash flow interest coverage ratio.
C. A big operating cash flow to net income ratio.
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Learning Outcome Statements
identify financial reporting choices and biases that affect the quality and comparability of companies' financial statements and explain how such biases may affect financial decisions;
evaluate the quality of a company's financial data and recommend appropriate adjustments to improve quality and comparability with similar companies, including adjustments for differences in accounting standards, methods, and assumptions;
evaluate how a given change in accounting standards, methods, or assumptions affects financial statements and ratios;
analyze and interpret how balance sheet modifications, earnings normalization, and cash flow statement related modifications affect a company's financial statements, financial ratios, and overall financial condition.
CFA® 2025 Level II Curriculum, Volume 2, Module 15.