Which one of the following ratios is used to calculate the times-interest-earned ratio?

A) Net profit/Interest expense
B) Pretax profit/EBIT
C) EBIT/Sales
D) EBIT/Interest expense

Pretax Profit

The earnings a company generates before taxes are deducted.

Net Profit

The amount of profit left over after all expenses and taxes have been subtracted from total revenue.

Times-Interest-Earned Ratio

A metric used to evaluate a company's ability to meet its interest obligations, calculated as earnings before interest and taxes (EBIT) divided by interest expense.