Times interest earned is calculated by:
A)Multiplying interest expense by income.
B)Dividing interest expense by income before depreciation and interest expense.
C)Dividing income before interest expense and income taxes by interest expense.
D)Multiplying interest expense by income before interest expense.
E)Dividing income before interest expense by interest expense and income taxes.

Question

Quizplus · Accepted Answer

Times interest earned is calculated by dividing income before interest expense and income taxes by interest expense. This ratio measures the company's ability to pay interest expenses from its earnings before taxes and is a measure of the company's creditworthiness.

Times Interest Earned Is Calculated By