A company with a times-interest-earned ratio that is well above the industry average would likely have difficulty making the interest payments on its loans, as creditors would see that it was overextended in its debts.

Question

Quizplus · Accepted Answer

The statement is incorrect. A company with a times-interest-earned ratio that is well above the industry average would indicate that the company is profitable and has a strong ability to cover its interest payments on its loans. A high ratio indicates that the company generates enough earnings to easily pay its interest expenses.

A Company with a Times-Interest-Earned Ratio That Is Well Above