This ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges.
A) Times interest earned
B) Basic earning power
C) Fixed charge coverage ratio
D) ROA

Question

Quizplus · Accepted Answer

The ratio that measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges is the fixed charge coverage ratio. This ratio is calculated by dividing earnings before fixed charges and taxes (EBIT) by the sum of fixed charges and interest expenses. A higher fixed charge coverage ratio indicates that a company has enough earnings to cover its fixed costs and is less likely to default on its financial obligations.

This Ratio Measures the Number of Dollars of Operating Earnings