The earnings to fixed charges ratio:
A)indicates how efficiently assets are used.
B)typically includes depreciation in the denominator.
C)typically excludes extraordinary gains and losses from the numerator.
D)indicates the proportion of debt used to finance a company.

Question

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The earnings to fixed charges ratio is a measure used to evaluate a company's ability to cover its fixed charges (such as interest on debt) with its earnings. It typically excludes extraordinary gains and losses from the numerator to provide a more accurate picture of the company's ongoing ability to generate income to cover these charges. Choices A, B, and D describe other financial metrics or considerations.

The Earnings to Fixed Charges Ratio