The time-interest-earned ratio is a measure of ability to pay debt.

Question

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The time-interest-earned ratio shows a company's ability to cover interest payments on its debt, which is an important factor in determining its overall financial health and ability to pay back its creditors. A higher ratio indicates a stronger ability to pay off debt, while a lower ratio may suggest that the company is at risk of defaulting on its debt obligations.

The Time-Interest-Earned Ratio Is a Measure of Ability to Pay