A Toronto fiRm Has a Times Interest Earned Ratio of 2.7

question 174

Multiple Choice

A Toronto firm has a times interest earned ratio of 2.7 times. This means:

• A) The firm generated enough cash to cover its interest expense 2.7 times.
• B) The firm has sufficient EBIT to cover its interest expense 2.7 times.
• C) The interest expense of this firm exceeded earnings before taxes by 2.7 times.
• D) The net income of this firm is sufficient to cover its interest expense 2.7 times.
• E) The firm earned $1 in EBIT for every $2.70 it paid out in interest.

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Definitions:

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The greatest difference between revenue and expense.

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A polynomial function of the second degree, generally represented as f(x) = ax^2 + bx + c, where a, b, and c are constants and a ≠ 0.

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A financial transaction where a business sells its accounts receivable to a third party at a discount to gain immediate cash.