The lower the times interest earned ratio, the more likely:
A) a default in payment will occur.
B) a business can pay off their loan.
C) a business will produce a gain.
D) interest payments can be made.

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest payments. A lower ratio indicates that the company has less earnings relative to its interest obligations, increasing the risk of defaulting on payments.

The Lower the Times Interest Earned Ratio, the More Likely