Higher the value of the times interest earned ratio, higher is the proportion of the firm's interest income compared to its contractual interest payments.

Question

Quizplus · Accepted Answer

The times interest earned ratio measures a company's ability to meet its interest payments, not the proportion of interest income to interest payments. It's calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Higher the Value of the Times Interest Earned Ratio, Higher