The times-interest-earned ratio is one indication of a firm's ability to meet both long-term and short-term obligations.

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The times-interest-earned ratio measures a company's ability to meet its interest payments on debt. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio indicates that a company is more capable of covering its interest expenses and suggests that it has a lower risk of defaulting on its debts. Therefore, the times-interest-earned ratio can be used as an indicator of a firm's ability to meet both its long-term and short-term obligations.

The Times-Interest-Earned Ratio Is One Indication of a Firm's Ability