The Number of Times Interest Expense Is Earned Is Computed

question 35

Multiple Choice

The number of times interest expense is earned is computed as

• A) net income plus interest expense, divided by interest expense
• B) income before income tax plus interest expense, divided by interest expense
• C) net income divided by interest expense
• D) income before income tax divided by interest expense

---

Definitions:

Net Realizable Value

The estimated selling price in the ordinary course of business minus estimated costs of completion and applicable selling expenses.

Unsecured Non-priority Creditor

This type of creditor has a claim against the debtor that is not backed by collateral and does not have priority in bankruptcy proceedings.

Chapter 7 Liquidation

A process under the U.S. bankruptcy laws where a bankrupt company's assets are sold off to pay creditors.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered or used but not yet paid for.