The times interest earned ratio is computed as
A) Income before income taxes + Interest expense ÷ Interest expense
B) Income before income taxes - Interest expense ÷ Interest expense
C) Income before income taxes ÷ Interest expense
D) Income before income taxes + Interest expense ÷ Interest revenue

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated by adding income before income taxes to interest expense, then dividing by interest expense. This measures a company's ability to meet its interest obligations.

The Times Interest Earned Ratio Is Computed as