Which one of the following ratios is an indicator of the long-run safety of a firm?
A)profit margin
B)times interest earned
C)earnings per share
D)return on stockholders' equity

Question

Quizplus · Accepted Answer

The times interest earned ratio, also known as the interest coverage ratio, is an indicator of a firm's ability to meet its interest obligations on outstanding debt, which reflects the long-run safety and financial stability of the firm. It measures how many times a company can cover its interest payments with its earnings before interest and taxes (EBIT), thus directly relating to the firm's long-term solvency.

Which One of the Following Ratios Is an Indicator of the Long-Run