The ratio is a more severe measure of a firm's ability to meet fixed financial obligations than is the times interest earned ratio.
A)acid test
B)debt
C)fixed charge coverage
D)debt to equity

Question

Quizplus · Accepted Answer

The fixed charge coverage ratio measures a firm's ability to meet both fixed expenses and interest payments, while the times interest earned ratio only measures its ability to meet interest payments. Therefore, the fixed charge coverage ratio is a more severe measure of a firm's ability to meet fixed financial obligations. The acid test ratio measures a firm's ability to pay off short-term liabilities, the debt ratio measures a firm's total debt relative to its assets, and the debt to equity ratio measures a firm's debt relative to its equity. None of these ratios specifically measure a firm's ability to meet fixed financial obligations.

The Ratio Is a More Severe Measure of a Firm's