The Higher the Value of ________ Ratio, the Better Able

question 56

Multiple Choice

The higher the value of ________ ratio, the better able the firm is to fulfill its interest obligations.

• A) debt
• B) average collection period
• C) times interest earned
• D) average payment period

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Definitions:

Income Summary Account

A temporary account used in accounting to transfer the sums of revenues and expenses at the end of an accounting period.

Dividends Declared Account

An account used to record the amount of dividends that a company's board of directors has decided to distribute to its shareholders.

Post-closing Trial Balance

A list of all accounts still open after closing entries are made, used to verify the equality of debits and credits.

Retained Earnings

The portion of net income that is kept by the company rather than distributed to shareholders in the form of dividends to be reinvested in the business or pay off debt.