The Times Interest Earned Is Computed by Dividing

question 32

Multiple Choice

The times interest earned is computed by dividing

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

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Definitions:

Units Sold

The total number of units of a product sold within a specific period, reflecting the volume of business activity.

Variable Cost

An expense that fluctuates with the level of output or sales volume, such as the cost of raw materials used in a product's manufacture.

Fixed Cost

Costs that do not vary with the volume of production or sales, remaining constant over a specified range of activity and period of time, such as rent or salaries.

Units Sold

The total number of a product that a company sells within a particular period, indicating the volume of business activity.