One Way Analysts Measure the Ability of a Company to Meet

question 30

Multiple Choice

One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. How would a company with $100,000 of outstanding bonds paying 8.5% annually and income before interest and taxes of $50,000, calculate the interest coverage (accrual basis) ratio?

• A)Income before interest and taxes divided by the interest expense.
• B)Income before interest and taxes divided by carrying value of the bonds outstanding.
• C)Income before interest and taxes divided by the face value on bonds.
• D)Face value of the bonds divided by income before interest and taxes.

---

Definitions:

Myelin Sheath

A fatty layer that surrounds the axons of some nerve cells, serving as insulation and increasing the speed at which nerve impulses are conducted.

Axons

Neuronal fibers that transmit electrical signals from the neuron's cell body to other cells, playing a critical role in the central nervous system's function.

Myelinated Axons

Axons that are covered with myelin, a fatty substance that speeds up the transmission of nerve impulses.

Action Potential

A rapid rise and subsequent fall in voltage or electrical charge across a cellular membrane, typical of neurons and muscle cells.