We use the times interest earned ratio to compare interest payments with a company's income available to pay those charges.

Question

Quizplus · Accepted Answer

The statement is true. The times interest earned ratio measures a company's ability to meet its interest payments with its income. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. A higher ratio indicates that the company has more earnings available to cover its interest charges, while a lower ratio may suggest that the company may struggle to meet its interest payments.

We Use the Times Interest Earned Ratio to Compare Interest