Which of the following ratios is considered a measure of a company's ability to pay interest on long-term debt?
A) price/earnings ratio
B) acid-test ratio
C) times-interest-earned ratio
D) earnings per common share

Question

Quizplus · Accepted Answer

The times-interest-earned ratio measures a company's ability to pay interest on long-term debt by comparing its earnings before interest and taxes (EBIT) to the interest payments on its debt. The higher the ratio, the better a company's ability to pay interest on its debt. A and D are measures of profitability, while B is a measure of a company's liquidity.

Which of the Following Ratios Is Considered a Measure of a Company's