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

question 71

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.

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Definitions:

GDP

Gross Domestic Product encapsulates the sum value of every good and service generated within a country's borders over a designated period.

Productive Nonmarket Activities

Economic activities that are productive but do not involve market transactions, such as household work.

Depletion

The reduction in the quantity or value of a resource, such as minerals, forests, or fossil fuels, due to extraction or usage over time.

Resource Base

The total available resources that an economy has access to, including natural resources, labor, and capital.