Times interest earned measures how many times operating income is able to pay the company's interest expense.

Question

Quizplus · Accepted Answer

The statement is true. Times interest earned is a solvency ratio that indicates a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. The higher the ratio, the better the company's ability to meet its interest obligations.

Times Interest Earned Measures How Many Times Operating Income Is