Asked by Angel Medrano on May 22, 2024
Verified
A high value for the times interest earned ratio means that a company is a lower risk borrower.
Times Interest Earned
A financial ratio that measures a company's ability to cover its interest expenses on outstanding debt with its before-tax earnings, also known as the interest coverage ratio.
- Comprehend how liabilities affect a firm's financial stability and the evaluation of risks.
- Comprehend the calculation and significance of the times interest earned ratio.
Verified Answer
KC
Karinna ChaluisantMay 23, 2024
Final Answer :
True
Explanation :
A higher times interest earned ratio indicates that the company has more earnings to cover its interest obligations, which means it is less likely to default on its debt obligations and is considered a lower risk borrower.
Learning Objectives
- Comprehend how liabilities affect a firm's financial stability and the evaluation of risks.
- Comprehend the calculation and significance of the times interest earned ratio.