Which of the Following Statements Is Not Correct

question 34

Multiple Choice

Which of the following statements is not correct?

• A)A ratio that indicates a firm's long-term,debt-paying ability from the income statement view is the times interest earned.
• B)Some of the items on the income statement that are excluded in order to compute times interest earned are interest expense,income taxes,and unusual or infrequent items.
• C)Capitalized interest should be included with interest expense when computing times interest earned.
• D)Usually,the highest times interest coverage in the most recent five-year period is used as the primary indication of the interest coverage.
• E)In the short run,a firm can often meet its interest obligations,even when the times interest earned is less than 1.00.

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Definitions:

Accounting Profits

The total revenue of a business minus the explicit costs; it's the profit figure calculated according to generally accepted accounting principles.

Total Revenues

The overall income generated by a firm or economy from its business activities, including sales of goods and services, before any expenses are deducted.

Marginal Returns

The additional output that is produced by using one more unit of a variable resource, keeping all other inputs constant.

Nonlabor Resources

are inputs in the production process that are not related to work or effort by employees, such as capital, land, and materials.