A Times Interest Earned Ratio of 5 Indicates the Firm

question 11

Multiple Choice

A times interest earned ratio of 5 indicates the firm:

• A) pays 5 times its earnings in interest expense.
• B) earns significantly more than its interest obligations.
• C) has interest expense equal to 5% of EBIT.
• D) has a low tax liability.

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Definitions:

Interstate Agreements

Contracts or treaties between two or more states within a federation like the United States, often requiring federal approval.

Intrastate Agreements

Agreements or contracts that occur within the same state, subject to the state's laws and not impacting interstate commerce.

Chicago School

An economic viewpoint emphasizing free-market principles and the reduction of government involvement in the economy, especially noted for its influence in antitrust law.

Antitrust Enforcement

The regulation and enforcement of laws to promote competition and prevent monopolies and other practices that restrain trade.