The Times Interest Earned Is Computed by Dividing

question 162

Multiple Choice

The times interest earned is computed by dividing

• A)net income by interest expense.
• B)income before income taxes by interest expense.
• C)income before interest expense by interest expense.
• D)income before interest expense and income taxes by interest expense.

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Definitions:

Sales

The total income generated from goods or services sold by a company before any costs or expenses are deducted.

Stockholders' Equity

The residual interest or ownership of a company's shareholders after all liabilities have been deducted from total assets.

Net Operating Income

The income generated from normal business operations after subtracting operating expenses from operating revenues but before taxes and interest.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment or product, aiding in profitability analysis.