Ask Question
BusinessBusiness
8 October, 05:41

A company's times interest earned ratio is 12.1. This means that a. the company has 12 times more debt than equity. b. bondholders are at risk of not receiving their interest payments. c. the company has more than enough earnings to make its interest payments. d. None of these choices are correct.

+5
Answers (1)
  1. 8 October, 06:09
    0
    The correct answer is letter "C": the company has more than enough earnings to make its interest payments.

    Explanation:

    Times Interest Earned or TIE measures the ability of an organization to pay its debt. TIE is calculated by dividing a company's earnings before interest and taxes by the interest that is payable on its debts. A low ratio means the company fails to pay debts, and if it fails to fulfill its responsibilities, it may default in bankruptcy. A high ratio means a business can cover its debt expenses.

    Thus, if a company's TIE is 12.1 it means its pre-taxed earnings are 12.1 greater than its annual interest expense implying the firm has the funds necessary to cover its interest payment.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A company's times interest earned ratio is 12.1. This means that a. the company has 12 times more debt than equity. b. bondholders are at ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
What does a fish hatchery attendant do in the giver?
Answers (2)
Wheeling Inc. uses the aging of accounts receivable method. Its estimate of uncollectible receivables resulting from the aging analysis equals $6,900.
Answers (1)
The common stock account in a company's balance sheet is measured as: -The number of common shares outstanding multiplied by the stock's par per share -The number of common shares outstanding multiplied by the stock's current market price per share
Answers (1)
An accelerated depreciation method: A) Recognizes more depreciation expense in the early years of an asset's useful life and less in the later years. B) Results in reporting higher earnings every year.
Answers (1)
Patrick bought 30 shares of stock at $16.49 per share. He received dividends of $0.75 per share for 1 year. His ROI was %. (Round percentages to one decimal place.)
Answers (1)
New Questions in Business
Why is it important to know the interest rate on your credit card? a) The higher the interest rate, the more money you will be paying back b) The higher the interest rate, the less money you will be paying back c) The lower the interest rate, the
Answers (2)
It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only all the firms being compared have the same proportion of fixed assets to total assets. a) trueb) false
Answers (1)
Which of the following actions differentiates an entrepreneur from other small business owners?
Answers (1)
Mccoo Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $1.50 per direct labor-hour.
Answers (1)
Which of the following is true of Finished Goods Inventory? A. Finished Goods Inventory is an account used by a manufacturer and includes completed goods that have not yet been sold. B.
Answers (1)
Home » Business » A company's times interest earned ratio is 12.1. This means that a. the company has 12 times more debt than equity. b. bondholders are at risk of not receiving their interest payments. c.
Sign Up Forgot Password?