The ratio that measures the number of times that operating income can cover interest expense is the:
A)leverage.
B)rate of return on total assets.
C)debt ratio.
D)times-interest-earned ratio.

Question

Quizplus · Accepted Answer

The ratio that measures the number of times that operating income can cover interest expense is the times-interest-earned ratio. Option A is incorrect because leverage is a measure of the degree to which a company has borrowed money. Option B is incorrect because the rate of return on total assets is a profitability ratio, which measures how efficiently a company uses its assets to generate profits. Option C is incorrect because the debt ratio is a solvency ratio that measures the percentage of total assets financed by debt.

The Ratio That Measures the Number of Times That Operating