The number of times interest charges are 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

The number of times interest charges are earned, also known as the interest coverage ratio, is calculated by dividing income before income tax plus interest expense by interest expense. This measures a company's ability to meet its interest obligations.

The Number of Times Interest Charges Are Earned Is Computed