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

Question

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The times interest earned ratio measures a company's ability to pay its interest expense on its debt, and a declining ratio indicates that the company may be struggling to generate enough earnings to cover its interest payments. This increases the risk of default on its liabilities, as the company may not be able to make its required payments on time.

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