A Company Has Fixed Interest Expense of $5,000,its Income Before

question 47

Multiple Choice

A company has fixed interest expense of $5,000,its income before interest expense and income taxes is $17,000,and its net income is $9,400.The company's times interest earned ratio equals:

• A)0.5.
• B)1.8.
• C)1.9.
• D)3.4.
• E)0.3.

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Definitions:

Total Excess

The amount by which returns on an investment exceed the benchmark or risk-free return over a specified period.

Bogey Portfolio

An investment portfolio that serves as a benchmark against which other portfolios' performances are measured.

Geometric Average

A method of calculating the average rate of return of a set of values multiplicatively linked together, commonly used to determine the performance of investments over time.

Compounding Principle

The process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.