What ratio helps to measure the risk involved in financing a business with borrowed funds?
A)Asset turnover ratio
B)Current ratio
C)Interest cover ratio
D)Profit margin ratio

Question

Quizplus · Accepted Answer

The interest cover ratio, also known as the times interest earned ratio, helps to measure the risk involved in financing a business with borrowed funds by showing how many times the earnings of the company cover the interest expense. A higher interest cover ratio indicates that the company is generating enough earnings to cover its interest expense and is therefore less risky to finance with borrowed funds.

What Ratio Helps to Measure the Risk Involved in Financing