Creditors often look for a times-interest-earned ratio of at least 4:1 to 6:1 before pronouncing a company a good credit risk.

Question

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This statement is true. A times-interest-earned ratio of 4:1 to 6:1 indicates that a company's earnings are sufficient to cover its interest payments at least four to six times over, which is considered a stable and safe level for creditors to consider extending credit to the company.

Creditors Often Look for a Times-Interest-Earned Ratio of at Least