Asked by Azreen Azahari on May 28, 2024
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The times interest earned is computed by dividing net income by interest expense.
Times Interest Earned
A ratio that measures a company's ability to meet its interest payments based on its earnings before interest and taxes.
Net Income
The profit of a company after all expenses and taxes have been subtracted from total revenue, indicating the company's actual profitability.
Interest Expense
The cost incurred by an entity for borrowed funds; it is the price paid for the use of borrowed money.
- Understand the computation and implications of the times interest earned ratio.
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Learning Objectives
- Understand the computation and implications of the times interest earned ratio.
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