A bank is evaluating whether to issue a long$-$term loan. The company's debt$-$to$-$equity ratio is $0\mathrm{.}72,$ and interest coverage ratio is $5\mathrm{.}4.$ Which statements are correct in assessing the firm's solvency: $($i$)$ A low debt$-$to$-$equity ratio indicates reliance on equity financing; $($ii$)$ Interest coverage above $5$ suggests the company can comfortably service debt; $($iii$)$ The company has high financial leverage risk; $($iv$)$ Solvency ratios reflect short$-$term liquidity; $($v$)$ A declining debt ratio over time indicates improving solvency.

Question $14$Answer

a$.$

Only one of the statements is correct

b$.$

Two of the statements are correct

c$.$

All of the statements are correct

d$.$

Three of the statements are correct

e$.$

None of the statements is correct