A Times Interest Earned Ratio of 0

question 40

Multiple Choice

A times interest earned ratio of 0.90 to 1 means:

• A)that the firm will default on its interest payment.
• B)that net income is less than the interest expense.
• C)that the cash flow is less than the net income.
• D)that the cash flow exceeds the net income.
• E)none of the answers are correct.

---

Definitions:

Partnership

A legal form of business operation between two or more individuals who share management and profits.

Termination Provisions

Clauses within contracts that detail the conditions under which the agreement may be ended by either or both parties.

Franchise Contract

A legal agreement where a franchisor grants the franchisee the rights to use the brand, operating systems, and products or services of the franchisor for a specified period.

Laws Governing

The body of laws and regulations that establish the rules and standards applicable to specific areas, activities, or sectors.