If lease payments are reduced:
A) times interest earned goes up.
B) fixed charges coverage goes up.
C) fixed charge coverage stays the same.
D) fixed charge coverage goes down.

Question

Quizplus · Accepted Answer

If lease payments are reduced, it means that fixed charges, which include lease payments, have decreased. As a result, fixed charge coverage (the ability of a company to cover its fixed expenses using its earnings) improves, meaning that the company has more funds available to cover its other fixed expenses. Therefore, B is the correct answer.

If Lease Payments Are Reduced