Which of the Following Is a True Statement About the Limitation

question 67

Multiple Choice

Which of the following is a True statement about the limitation on business interest deductions?

• A) Interest disallowed by this limitation is carried back three years and then forward five years.
• B) The limitation is calculated as a percentage of the taxpayer's total taxable income.
• C) This limitation is not imposed on businesses with average annual gross receipts of $25 million or less for the prior three taxable years.
• D) All of the choices are False.
• E) All of the choices are True.

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Definitions:

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its interest obligations from its operating income.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell products, and collect cash from customers.

Average Collection Period

The average number of days it takes for a company to receive payments owed by its customers, indicating the effectiveness of its credit and collection policies.

Inventory Turnover

A figure representing the frequency at which a business's stock is both sold and refilled over an assigned period, showing the adeptness of inventory administration.