The Times Interest Earned Computation Is

question 17

Multiple Choice

The times interest earned computation is:

• A) (Net income + Interest expense + Income taxes)/Interest expense.
• B) (Net income + Interest expense - Income taxes)/Interest expense.
• C) (Net income - Interest expense - Income taxes)/Interest expense.
• D) (Net income - Interest expense + Income taxes)/Interest expense.
• E) Interest expense/(Net income + Interest expense + Income taxes expense).

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Definitions:

Profitability of Assets

Profitability of Assets assesses how effectively a company uses its assets to generate profits, typically measured as a ratio of net income to total assets.

Common Stockholders

Owners of common shares in a corporation, who have voting rights and are entitled to dividends as declared by the company's board of directors.

Earnings Per Share

A financial ratio that indicates the portion of a company's profit allocated to each outstanding share of common stock, measuring its profitability on a per-share basis.

Profitability

The ability of a business to generate earnings compared to its expenses and other relevant costs incurred during a specific period.