Explanation:
Explanation:
The interest coverage ratio measures a company's ability to meet its interest obligations from operating earnings. A higher ratio indicates improved solvency. For the given data:
The increase from 5 to 7 demonstrates stronger solvency.
On the other hand, the financial leverage ratio (total assets / shareholders' equity) reflects the degree of leverage. A higher ratio suggests increased leverage and weaker solvency:
Thus, only the interest coverage ratio indicates improved solvency, making Option A the correct choice.
An analyst evaluates the following financial data (in € thousands) for a manufacturing company over two years:
A
Interest coverage ratio exclusively
B
Financial leverage ratio exclusively
C
Both the interest coverage ratio and the financial leverage ratio
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