The higher the times-interest-earned ratio, the greater the ability the firm has is in meeting its interest obligations.

Question

Quizplus · Accepted Answer

The times-interest-earned ratio (also known as interest coverage ratio) measures a company's ability to cover its interest payments with its operating income. A higher ratio indicates that the company has more earnings available to meet its interest obligations, which means it is in a better position to manage its debt and financial risk. Thus, the statement is true.

The Higher the Times-Interest-Earned Ratio, the Greater the Ability the Firm