If a Firm Has Both Interest Expense and Lease Payments

question 90

Multiple Choice

If a firm has both interest expense and lease payments,

• A)times interest earned will be smaller than fixed charge coverage.
• B)times interest earned will be greater than fixed charge coverage.
• C)times interest earned will be the same as fixed charge coverage.
• D)fixed charge coverage cannot be computed.

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Definitions:

Consolidated Balance Sheet

A financial statement that summarizes the assets, liabilities, and shareholders' equity of a parent and its subsidiaries as one single entity.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Outstanding Common Shares

The total number of shares of common stock that are currently owned by investors, including shares held by institutional investors and restricted shares held by insiders and company officers.

Noncontrolling Interest

The portion of equity in a subsidiary not attributable, directly or indirectly, to a parent company, which reflects the interests of minority shareholders in the consolidated financial statements.