Which financial ratio indicates the ability of the company to meet its annual interest costs?
A) debt to asset ratio
B) debt to equity ratio
C) times interest earned
D) long-term debt to capital structure
E) coverage of fixed charges

Question

Quizplus · Accepted Answer

Times interest earned ratio measures the ability of the company to meet its annual interest expense. It measures the company's earnings before interest and taxes (EBIT) relative to its interest expense. A higher times interest earned ratio indicates that the company is generating enough earnings to cover its interest costs.

Which Financial Ratio Indicates the Ability of the Company to Meet