The highest possible value for the interest-burden ratio is ________, and this occurs when the firm ________.

A) 0; uses as much debt as possible
B) 1; uses debt to the point where ROA = interest cost of debt
C) 1; uses no interest-bearing debt
D) -1; pays down its existing debts

Interest-Burden Ratio

A financial metric that shows how much of a company's income is consumed by interest expenses.

Debt

Debt refers to the amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, often with interest.

ROA

Return on Assets, a financial ratio that measures the profitability of a company in relation to its total assets, indicating how efficient management is at using assets to generate earnings.