Asked by Mauricio Davila on May 20, 2024
Verified
The greater the times interest earned ratio,the greater the risk a company will not be able to pay interest expense.
Times Interest Earned
A financial ratio that measures a company's ability to meet its interest payments on outstanding debt with its operating income.
- Comprehend the fundamentals of capital structure and the effect of financing choices on the risk associated with a company.
Verified Answer
DC
Delano CodnerMay 25, 2024
Final Answer :
False
Explanation :
The greater the times interest earned ratio, the lower the risk a company will not be able to pay interest expense. This is because a higher ratio means that the company's earnings are more than sufficient to cover its interest expenses, indicating financial stability and a lower risk of default.
Learning Objectives
- Comprehend the fundamentals of capital structure and the effect of financing choices on the risk associated with a company.
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