In terms of solvency,the larger the number of times interest is earned,the better.

Question

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The number of times interest is earned is also known as Interest Coverage Ratio (ICR) or times interest earned ratio (TIE ratio). A higher ICR or TIE ratio implies that the company has enough operating income to cover its interest expense, which indicates higher solvency, reducing the chances of default. Therefore, the larger the number of times interest is earned, the better the solvency position of the company.

In Terms of Solvency,the Larger the Number of Times Interest