Which of the Following Statements About the Times-Interest-Earned Ratio Is

question 160

Multiple Choice

Which of the following statements about the times-interest-earned ratio is true?

• A)A lower ratio indicates a higher debt paying ability.
• B)Debt reduction leads to an increase in interest expense.
• C)The times-interest-earned ratio is also called the interest-coverage ratio.
• D)The times-interest-earned ratio is calculated by dividing gross income by interest expense.

---

Definitions:

Net Income

The total amount of profit earned by a company after all expenses and taxes have been subtracted from revenue.

Forward Contract

A non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed upon today.

Cash Flow Hedge

A strategy used in financial risk management to protect against the risk associated with fluctuations in cash flows due to changes in interest rates, foreign exchange rates, or other variables.