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

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to pay its interest obligations. The formula for this ratio is (income before income taxes and interest expense)/interest expense. Therefore, the best choice is D.

The Times Interest Earned Is Computed by Dividing