If the Times Interest Ratio

question 191

Multiple Choice

If the times interest ratio:

• A)Increases,then risk increases.
• B)Increases,then risk decreases.
• C)Is greater than 1.5,then the company is in default.
• D)Is less than 1.5,the company is carrying too little debt.
• E)Is greater than 1.5,the company is likely carrying too much debt.

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Definitions:

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies, where the investment is recorded at original cost and adjusted to reflect the investee's changes in net assets.

Dividends

Payments made by a corporation to its shareholder members, typically from profits or retained earnings, and often in the form of cash or stock.

Income

The financial gain earned or received by an entity within a specified timeframe, typically a result of employment, investments, or business operations.

Intra-entity Gross Profit

The profit made from transactions between divisions or units within the same company before external sales.