The times interest earned ratio measures a company's ability to
A)maintain profit after paying interest.
B)pay interest and debt on the due date.
C)make interest payments out of current earnings.
D)pay interest and debt from current assets already on hand.

Question

Quizplus · Accepted Answer

The times interest earned ratio calculates how many times a company's current earnings can cover its interest expense, indicating its ability to make interest payments out of current earnings. A higher number suggests a better ability to meet financial obligations.

The Times Interest Earned Ratio Measures a Company's Ability to