The times interest earned ratio reflects:
A) A company's ability to pay its operating expenses on time.
B) A company's ability to pay interest even if sales decline.
C) A company's profitability.
D) The relation between income and debt.
E) The relation between assets and liabilities.

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to pay its interest expenses even if sales decline. It indicates the number of times a company's operating income can cover its interest expenses. A higher times interest earned ratio indicates that a company is better able to meet its interest obligations.

The Times Interest Earned Ratio Reflects