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

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest obligations through its operating income. Choice C is the correct option because it takes into account both the operating income (income before income taxes and interest expense) and the interest expense in the calculation of the ratio.

The Times Interest Earned Ratio Is Computed by Dividing