The times interest earned ratio is a measure of:
A)A company's ability to pay its operating expenses on time.
B)A company's ability to pay interest incurred even if sales decline.
C)A company's profitability.
D)The relation between income and debt.
E)The relation between assets and liabilities.

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to pay its interest expenses even if sales decline. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. A higher ratio indicates a company's better ability to cover its interest expense.

The Times Interest Earned Ratio Is a Measure Of