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The Higher the Number of Times Interest Charges Are Earned

question 73

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The higher the number of times interest charges are earned ratio,the better the creditors' protection.


Definitions:

Straight-line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal yearly amounts.

Net Income

The comprehensive earnings of a corporation after expenses and taxes have been taken away from its revenues.

Discount Rate

A rate used to determine the present value of future cash flows, reflecting the time value of money and risk of the cash flows.

Profitability Index

A calculation that determines the relative profitability of an investment, indicating the value created per unit of investment.

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