The number of times interest expense is earned is computed as
A) net income plus interest expense, divided by interest expense
B) income before income tax plus interest expense, divided by interest expense
C) net income divided by interest expense
D) income before income tax divided by interest expense

Question

Quizplus · Accepted Answer

The number of times interest expense is earned, also known as the interest coverage ratio, is calculated by dividing income before income tax plus interest expense by interest expense. This measures how easily a company can pay interest on its outstanding debt.

The Number of Times Interest Expense Is Earned Is Computed