Times interest earned is calculated by:
A)Multiplying interest expense by income.
B)Dividing interest expense by income before interest expense.
C)Dividing income before interest expense and income taxes by interest expense.
D)Multiplying interest expense by income before interest expense.
E)Dividing income before interest expense by interest expense and income taxes.

Question

Quizplus · Accepted Answer

Times interest earned is calculated by dividing income before interest expense and income taxes by interest expense. This ratio measures a company's ability to meet its interest payments with its earnings. A higher ratio indicates a better ability to meet interest obligations.

Times Interest Earned Is Calculated By