The times interest earned ratio measures a company's ability to
A)Maintain profit after paying interest.
B)Pay interest and debt on the due date.
C)Make interest payment out of current earnings.
D)Pay interest and debt from current assets already on hand.

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest payments from its current earnings. It shows how many times a company can cover its interest payment with its earnings before interest and taxes (EBIT). A higher ratio indicates that the company is better equipped to pay its interest expenses out of its current earnings.

The Times Interest Earned Ratio Measures a Company's Ability to