Times interest 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

Times interest earned is a financial metric used to evaluate a company's ability to meet its debt obligations. It is calculated by dividing the company's income before tax and interest by its interest expense. This provides an indication of the company's ability to make interest payments on its outstanding debt. Therefore, option B is the correct answer as it divides income before income tax and interest expenses by interest expenses.

Times Interest Earned Is Computed as