An Auditor Is Concerned About Short-Term Interest Payment Obligations Due

question 70

Multiple Choice

An auditor is concerned about short-term interest payment obligations due to a recent major bond issue of the client.A ratio the auditor should consider determining is _________.

• A)debt-equity ratio
• B)quick (acid test) ratio
• C)times interest earned ratio
• D)short term payment ratio

---

Definitions:

Incremental Revenue

The additional revenue generated from a new business decision or activity.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent or salaries.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.