The Ratio That Measures the Company's Ability to Meet Required

question 47

Multiple Choice

The ratio that measures the company's ability to meet required interest payments is the:

• A) debt-to-equity ratio.
• B) current ratio.
• C) Price/Earnings ratio.
• D) times interest earned ratio.

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Definitions:

Quality Of Earnings

An assessment of how accurately a company's reported income reflects its true earning capacity, and if it's indicative of its future financial performance.

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting used in any given jurisdiction.

Net Cash

The amount of cash remaining after all operating expenses, investments, and financial obligations have been accounted for.

Equity

The amount of ownership interest in a company or property, represented by the value of shares held.