An increase in ________ will decrease the times-interest-earned ratio.
A) the tax rate
B) gross profit
C) interest expense
D) common stock

Question

Quizplus · Accepted Answer

The times-interest-earned ratio measures a company's ability to meet its debt obligations. A decrease in interest expense (which is included in the denominator of the ratio) will increase the ratio, while an increase in interest expense will decrease the ratio. Therefore, choice C (an increase in interest expense) is the correct answer. Choices A, B, and D are not directly related to the times-interest-earned ratio.

An Increase in ________ Will Decrease the Times-Interest-Earned Ratio