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:

Neatness

The quality of being clean, orderly, and tidy.

Major Consequence

A significant outcome or result that follows an action, decision, or event, often having long-lasting effects.

Work Habits

A person’s characteristic approach to work, including such things as organization, priority setting, and handling of paperwork, e-mail, and intranets.

Preoccupied

Being absorbed in thought or engrossed in an activity to the extent of becoming unaware of one’s surroundings.