Asked by Makayla Kortz on Jul 09, 2024
Verified
Halverson's times interest earned ratio was 2.98 in 2019,2.79 in 2018,and 2.31 in 2017.Which of the following statements about the ratio is correct?
A) The increasing ratio indicates decreasing levels of debt on which interest is incurred.
B) The increasing ratio indicates the strategy of pursuing growth by investment in other companies,which has increased debt,but Halverson's profits have not yet increased from those investments.
C) The increasing ratio implies increased long-term debt financing.
D) The increasing ratio would be considered by creditors to be an indicator of higher risk.
Times Interest Earned Ratio
A metric used to measure a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes.
Debt
An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, often with interest.
Investment
The action or process of investing money for profit or material result.
- Calculate financial ratios to assess a company's ability to bear interest and debt.
Verified Answer
Learning Objectives
- Calculate financial ratios to assess a company's ability to bear interest and debt.
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