A times interest earned ratio of 0.90 to 1 means:
A)that the firm will default on its interest payment.
B)that net income is less than the interest expense.
C)that the cash flow is less than the net income.
D)that the cash flow exceeds the net income.
E)none of the answers are correct.

Question

Quizplus · Accepted Answer

A times interest earned ratio of 0.90 to 1 indicates that the firm is generating only 90 cents of operating income for every $1 of interest expense. This means that its net income is less than the interest expense, which raises concerns about its ability to service its debt obligations.

A Times Interest Earned Ratio of 0