Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?
A)Times interest earned
B)Basic earning power
C)Fixed charge coverage ratio
D)ROA

Question

Quizplus · Accepted Answer

The fixed charge coverage ratio measures the ability of a company to meet its fixed expenses, including interest payments, out of its operating earnings. A higher ratio indicates that the company is more capable of meeting its fixed expenses, which makes it more creditworthy. The times interest earned ratio measures the company's ability to meet its interest expense only, while basic earning power measures the earnings before taking any fixed expenses into account. ROA is a measure of profitability, not fixed charge coverage.

Which Ratio Measures the Number of Dollars of Operating Earnings