Which of the Following Statements Concerning a Firm's Times-Interest Earned

question 6

Multiple Choice

Which of the following statements concerning a firm's times-interest earned (TIE) ratio is correct?

• A)Generally the lower its TIE ratio, the higher the probability that the firm will default on its debt.
• B)The TIE ratio is calculated by dividing net income by interest charges.
• C)The TIE ratio increases if the debt/assets ratio increases, and vice versa.
• D)The TIE ratio is always greater than 1.
• E)The TIE ratio shows the effects of both operating leverage and financial leverage.

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