A Times-Interest-Earned Ratio of 3

question 25

Multiple Choice

A times-interest-earned ratio of 3.5 indicates that the firm:

• A) pays 3.5 times its earnings in interest expense.
• B) has interest expense equal to 3.5% of EBIT.
• C) has interest expense equal to 3.5% of net income.
• D) has EBIT equal to 3.5 times its interest expense.

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Definitions:

Life Insurance

A contract between an insurer and a policyholder, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.

Auto Insurance

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident.

Federal Government

The national government of a federated state, which holds the authority to govern the issues that affect the entire country.

Health Insurance

A form of insurance that covers the cost of an insured individual's medical and surgical expenses.