Which of the Following Statements Is Not True

question 120

Multiple Choice

Which of the following statements is not true?

• A) The times interest earned ratio gives an indication of a company's ability to meet interest payments as they come due.
• B) The times interest earned ratio is calculated by dividing the sum of net earnings, interest expense, and income tax expense, by interest expense.
• C) EBIT can be calculated by adding interest expense and income tax expense to net earnings.
• D) The higher a company's debt to total assets ratio, the lower the company's times interest earned ratio will be.

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Definitions:

Operating Activities

Activities that relate to the core operations of a company, including the production, distribution, and sale of goods and services.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.

Investing Activities

Activities related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Cash Flows

The movement of cash into or out of a business, project, or financial product as it generates income or pays expenses.