The times interest earned ratio is defined as:
A) Net income divided by interest expense.
B) Interest expense divided by net income.
C) EBIT divided by interest expense.
D) Interest expense divided by EBIT.
E) Sales divided by interest expense.

Question

Quizplus · Accepted Answer

The times interest earned ratio, also known as the interest coverage ratio, is calculated by dividing Earnings Before Interest and Taxes (EBIT) by interest expense. This measures a company's ability to meet its interest payments.

The Times Interest Earned Ratio Is Defined As