The Times Interest Earned Ratio Is Computed by Dividing

question 28

Multiple Choice

The times interest earned ratio is computed by dividing

• A) Income before income taxes and interest expense by interest expense
• B) Income before taxes by interest expense
• C) Net income by interest expense.
• D) Net income and interest expense by interest expense

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Definitions:

Mortgage

A loan secured by real property, typically used to purchase that property, where the borrower agrees to make payments to the lender over a set period.

Compounded Monthly

Interest is calculated and added to the total amount on a monthly basis, leading to faster growth due to more frequent compounding periods.

Present Value

The current assessment of a future sum of money or cash flows, given a designated return rate.

Compounded Quarterly

The calculation of interest on the principal amount and previously earned interest on a quarterly basis.