The ________ ratio may indicate that the firm will not be able to meet interest obligations due on outstanding debt.
A) debt
B) net profit margin
C) return on total assets
D) times interest earned

Question

Quizplus · Accepted Answer

The times interest earned (TIE) ratio measures a firm's ability to meet its interest payments on outstanding debt, and a low TIE ratio may indicate that the firm is at risk of defaulting on its debt obligations. A low debt ratio alone does not necessarily indicate this risk, as it only measures the level of a firm's debt in relation to its equity. Net profit margin and return on total assets are profitability ratios and do not necessarily indicate a firm's ability to meet its interest payments.

The ________ Ratio May Indicate That the Firm Will Not