Times interest earned is best described by:
A) how much net profit is available for every dollar of interest expense.
B) how much operating income is available for every dollar of interest expense.
C) how many sales are generated by debt.
D) how much income is generated by debt.

Question

Quizplus · Accepted Answer

Times interest earned ratio is calculated by dividing operating income (or earnings before interest and taxes, EBIT) by interest expense. This measures how easily a company can cover its interest obligations with its operating income.

Times Interest Earned Is Best Described By