Which of the Following Statements Is Not Correct

question 34

Multiple Choice

Which of the following statements is not correct?

• A)A ratio that indicates a firm's long-term,debt-paying ability from the income statement view is the times interest earned.
• B)Some of the items on the income statement that are excluded in order to compute times interest earned are interest expense,income taxes,and unusual or infrequent items.
• C)Capitalized interest should be included with interest expense when computing times interest earned.
• D)Usually,the highest times interest coverage in the most recent five-year period is used as the primary indication of the interest coverage.
• E)In the short run,a firm can often meet its interest obligations,even when the times interest earned is less than 1.00.

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Definitions:

Long Run

An economic term referring to a period in which all factors of production and costs are variable, allowing for full adjustment to changes in the market.

Price-taking

A market condition in which individual buyers or sellers have no influence over the market price of a product, commonly seen in perfectly competitive markets.

Perfectly Competitive Industry

A market structure characterized by many sellers offering identical products, where no single seller can influence the market price.

Marginal Cost

The additional expense incurred from producing one more unit of a good or service.