Which of the following ratios shows how far operating income can decline before the firm will have difficulties servicing its debt obligation?
A) Fixed asset turnover
B) Total asset turnover
C) Debt ratio
D) Times interest earned ratio

Question

Quizplus · Accepted Answer

The Times Interest Earned (TIE) ratio measures a company's ability to meet its debt obligations based on its current operating income. It indicates how many times the operating income can cover the interest expenses, thus showing how far operating income can decline before the firm struggles to service its debt.

Which of the Following Ratios Shows How Far Operating Income