Should Both Favorable and Unfavorable Variances Be Investigated, or Only

question 170

Essay

Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.

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Definitions:

Times Interest Earned

Times interest earned is a financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Interest Expense

The cost of borrowing money.

Income Tax Expense

The cost associated with income taxes owed to federal, state, or local governments, recognized in the accounting period in which the income was earned.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.