Which of the following statements is not correct?
A)A ratio that indicates a firm's long-term,debt-paying ability from the income statement view is the times interest earned.
B)Some of the items on the income statement that are excluded in order to compute times interest earned are interest expense,income taxes,and unusual or infrequent items.
C)Capitalized interest should be included with interest expense when computing times interest earned.
D)Usually,the highest times interest coverage in the most recent five-year period is used as the primary indication of the interest coverage.
E)In the short run,a firm can often meet its interest obligations,even when the times interest earned is less than 1.00.

Question

Quizplus · Accepted Answer

Statement D is not correct because the times interest earned ratio is typically evaluated over a period to understand trends rather than selecting the highest value in a period as the primary indication of interest coverage. This ratio is used to assess a firm's ability to meet its interest obligations, and analysts usually look at it across multiple periods to gauge consistency and financial health, rather than focusing on a single highest value.

Which of the Following Statements Is Not Correct