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:

Operating Cash Flow

Cash generated by a company's normal business operations, indicating whether a company is capable of generating sufficient positive cash flow to maintain and grow its operations.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, often expressed as a percentage of sales revenue.

Variable Cost

Expenses that fluctuate in direct proportion to the amount of production or output, like labor and materials.

Fixed Costs

Expenses that do not change in total regardless of changes in the volume of goods or services produced or sold.