-Kamal Company's times interest earned ratio for 2017:
A) Decreased slightly, which indicates the company has about the same ability to pay interest on its debt.
B) Indicates the company cannot meet its current year interest payments out of current year earnings.
C) Increased, which indicates the company's creditors will be pleased.
D) Shows an increase in the company's ability to make its interest payments.

Question

-Kamal Company's times interest earned ratio for 2017:
A) Decreased slightly, which indicates the company has about the same ability to pay interest on its debt. 
B) Indicates the company cannot meet its current year interest payments out of current year earnings. 
C) Increased, which indicates the company's creditors will be pleased. 
D) Shows an increase in the company's ability to make its interest payments.

Quizplus · Accepted Answer

Times interest earned for 2017 is 22.77 times ($4,463 / $196). In 2016 the ratio was 23.12 times ($3,976 / $172). The times interest earned ratio is a measure of long term solvency and the capacity of earnings to pay interest on debt and total interest expense.

-Kamal Company's Times Interest Earned Ratio for 2017