Which of the Following Ratios Measures the Extent to Which

question 40

Multiple Choice

Which of the following ratios measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs?

• A)fixed charge coverage ratio
• B)debt ratio
• C)times-interest-earned ratio
• D)return on equity
• E)profit margin

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Definitions:

Exchange Rate

The value of one currency for the purpose of conversion to another.

Historical Cost

The original monetary value of an asset or transaction, without adjustments for inflation or other factors.

Functional Currency

represents the currency of the primary economic environment in which an entity operates, crucial for financial reporting and determining the entity's financial results and position.

Retained Earnings

represents the cumulative amount of net income earned by a company over time that has not been distributed to shareholders as dividends.