The Times Interest Earned Ratio Is Calculated by Dividing Interest

question 19

True/False

The times interest earned ratio is calculated by dividing interest expense by income before interest expense and income taxes.

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Definitions:

Accounting

Process of measuring, interpreting, and communicating financial information to support internal and external business decision making.

Risk-Return Trade-Off

The principle that potential return rises with an increase in risk, describing the balance between the desire for the lowest possible risk and the highest possible returns.

Leverage

The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.