The Times Interest Earned Ratio Is a Measure Of

question 24

Multiple Choice

The times interest earned ratio is a measure of:

• A)A company's ability to pay its operating expenses on time.
• B)A company's ability to pay interest incurred even if sales decline.
• C)A company's profitability.
• D)The relation between income and debt.
• E)The relation between assets and liabilities.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined basis such as direct labor hours.

Direct Labour-Hours

The total hours of labor directly involved in the production of goods or services, often used as a basis for allocating overhead costs.

Direct Material Purchased

The raw materials acquired that are directly used in the manufacturing of a product.

Actual Overhead Cost

The real expenses incurred during production that are not directly tied to specific products, including electricity, rent, and managerial salaries.