The lower the times-interest-earned ratio, the lower the probability that a firm will default on its debt.

Question

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The lower the times-interest-earned ratio, the higher the probability that a firm will default on its debt. This is because the ratio measures the amount of income a firm has available to cover its interest expense, and a lower ratio means there is less income available to cover the expense.

The Lower the Times-Interest-Earned Ratio, the Lower the Probability That