If the times interest earned ratio:
A)Increases,then risk increases.
B)Increases,then risk decreases.
C)Is greater than 1.5,the company is in default.
D)Is less than 1.5,the company is carrying too little debt.
E)Is greater than 3.0,the company is likely carrying too much debt.

Question

Quizplus · Accepted Answer

If the times interest earned ratio increases, it means that the company's earnings before interest and taxes (EBIT) are increasing relative to its interest expenses. This indicates that the company is better able to meet its interest obligations and is therefore less risky.

If the Times Interest Earned Ratio