The Times Interest Earned Ratio Is Based on Net Income

question 89

True/False

The times interest earned ratio is based on net income because that is the amount of earnings that is available for making interest payments. Interest expense is deducted before taxes are determined; creditors have first claim on the earnings before taxes are paid.

Understand the concept and calculation of the degree of operating leverage.

Analyze the effects of sales mix changes on the overall break-even point for a company.

Construct and analyze contribution format income statements under different scenarios.

Determine the impact of sales volume changes on net operating income.

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Definitions:

Chevron

An American multinational energy corporation, one of the world's leading integrated energy companies, involved in every aspect of the oil and gas industry.

John D. Rockefeller

An American industrialist and philanthropist who was a co-founder of the Standard Oil Company and became one of the world's wealthiest individuals.

Oil Trust

Historical term referring to monopolies or near-monopolies in the oil industry, specifically in the United States during the late 19th and early 20th centuries.

Airline Deregulation Act

A United States federal law passed in 1978 that removed governmental control over fares, routes, and market entry of new airlines, significantly reducing barriers to entry in the airline industry.