The times interest earned ratio is computed by dividing
A) Income before income taxes and interest expense by interest expense
B) Income before taxes by interest expense
C) Net income by interest expense.
D) Net income and interest expense by interest expense

Question

Quizplus · Accepted Answer

The times interest earned ratio, also known as the interest coverage ratio, is calculated by dividing income before income taxes and interest expense (earnings before interest and taxes, or EBIT) by interest expense. This measures a company's ability to meet its interest obligations.

The Times Interest Earned Ratio Is Computed by Dividing