One Overall Objective of Accounting Is to Provide Financial Information

question 93

True/False

One overall objective of accounting is to provide financial information that is useful to potential capital providers who are making investment and lending decisions.

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Definitions:

Times Interest Earned

A ratio that assesses the risk that bondholders will not receive their interest payments or that interest payments will not be made if earnings decrease. The ratio is computed as income before income tax expense plus interest expense divided by interest expense.

Interest Expense

The cost incurred by an entity for borrowed funds, often reflected as a line item on the income statement.

Days' Sales

A financial metric that estimates the average time it takes for a company to convert its inventory into sales.

Inventory

The total amount of goods and materials held by a business for the purpose of sale or production.