If the times interest ratio:
A) Increases, then risk increases.
B) Increases, then risk decreases.
C) Is greater than 1.5, then the company is in default.
D) Is less than 1.5, the company is carrying too little debt.
E) Is greater than 3.0, the company is likely carrying too much debt.

Question

Quizplus · Accepted Answer

A higher times interest ratio (TIR) indicates that a company is generating enough earnings to meet its interest obligations. Therefore, a higher TIR signifies lower risk. On the other hand, a lower TIR indicates that a company's earnings may not be enough to cover its interest payments, increasing risk. Hence, if the TIR increases, the risk decreases, and if the TIR decreases, the risk increases.

If the Times Interest Ratio