The Times-Interest-Earned Ratio Is One, but Not the Only, Indication

question 87

True/False

The times-interest-earned ratio is one, but not the only, indication of a firm's ability to meet its long-term and short-term debt obligations.

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Definitions:

Accrual

A method of accounting that recognizes revenue and expenses when they are incurred, regardless of when cash transactions occur.

Disclosure

Disclosure involves the act of making new or important information known, especially about the financial or operational state of a company.

Current Assets

Assets that are expected to be converted into cash, sold or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Current Ratio

A financial ratio that indicates how well a company can cover its short-term liabilities with its present assets.