Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt?
A)Fixed charge coverage ratio
B)Times interest earned
C)Cash coverage ratio
D)ROA

Question

Quizplus · Accepted Answer

The ratio that measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt is the Times Interest Earned (TIE) ratio. It is calculated by dividing the firm's earnings before interest and taxes (EBIT) by its interest expense. A higher TIE ratio indicates that the firm is better able to service its debt obligations, as it has more operating earnings available to cover its interest payments.

Which Ratio Measures the Number of Dollars of Operating Earnings