The ________ ratio indicates whether a firm will be able to meet interest obligations due on outstanding debt.

Question

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The times interest earned ratio measures a firm's ability to meet interest obligations on outstanding debt. It is also known as the interest coverage ratio. This ratio is calculated by dividing earnings before interest and taxes (EBIT) by interest expense. A higher ratio indicates that a company is more capable of meeting its interest obligations, while a lower ratio suggests that it may face financial distress.

The ________ Ratio Indicates Whether a Firm Will Be Able