The times-interest-earned ratios of four companies are given below: $$\begin{array} { | l | r | }
\hline \text { Forge Company } & 8.9 \
\hline \text { Fellow Company } & 9.2 \
\hline \text { Stacy Company } & 6.7 \
\hline \text { Bennett Company } & 13.5 \
\hline
\end{array}$$ Which of the above companies has the highest debt-paying ability?
A) Forge Company
B) Fellow Company
C) Stacy Company
D) Bennett Company

Question

The times-interest-earned ratios of four companies are given below: $$\begin{array} { | l | r | } 
\hline \text { Forge Company } & 8.9 \
\hline \text { Fellow Company } & 9.2 \
\hline \text { Stacy Company } & 6.7 \
\hline \text { Bennett Company } & 13.5 \
\hline
\end{array}$$ Which of the above companies has the highest debt-paying ability?
A) Forge Company
B) Fellow Company
C) Stacy Company
D) Bennett Company

Quizplus · Accepted Answer

The times-interest-earned ratio is a measure of a company's ability to meet its interest obligations. A higher ratio indicates a greater ability to pay interest from before-tax earnings, thus Bennett Company with a ratio of 13.5 has the highest debt-paying ability.

The Times-Interest-Earned Ratios of Four Companies Are Given Below Which of the Above Companies Has the Highest Debt-Paying Ability