A Times Interest Earned Ratio of 5

question 35

Multiple Choice

A times interest earned ratio of 5.0 indicates that 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 percent of EBIT
• D)Has low tax liability

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Definitions:

Output

Output refers to the total amount of goods and services produced by a company, industry, or economy within a given period.

Profit-Maximizing Price

The optimal selling price for a product or service that allows a company to achieve the highest possible profit.

Single Firm

A business or company that operates independently, not part of a larger conglomerate or group.

Fundamental Cause

A primary or underlying factor that is responsible for a particular event, condition, or phenomenon.