When the times interest earned ratio increases,the likelihood of default on liabilities decreases.

Question

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The times interest earned ratio measures a company's ability to meet its interest obligations on its debt. If this ratio increases, it means that the company's income is increasing relative to its interest expenses, indicating a lower risk of default on its liabilities. Therefore, the likelihood of default on liabilities decreases as the times interest earned ratio increases.

When the Times Interest Earned Ratio Increases,the Likelihood of Default