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

Question

Quizplus · Accepted Answer

An increase in the times interest earned ratio indicates that a company is generating more earnings relative to its interest obligations, suggesting lower financial risk.

If the Times Interest Earned Ratio