Which one of the following ratios is an indicator of the long-run safety of a firm?

A) profit margin
B) times interest earned
C) earnings per share
D) return on stockholders' equity

Question

Which one of the following ratios is an indicator of the long-run safety of a firm?A) profit marginB) times interest earnedC) earnings per shareD) return on stockholders' equity

Shabely Rojas · Accepted Answer

Final Answer : B, Explanation :  The times interest earned ratio, also known as the interest coverage ratio, is an indicator of a firm's ability to meet its interest obligations on outstanding debt, which reflects the long-run safety and financial stability of the firm. It measures how many times a company can cover its interest payments with its earnings before interest and taxes (EBIT), thus directly relating to the firm's long-term solvency.

Which one of the following ratios is an indicator of the long-run safety of a firm?

A) profit margin
B) times interest earned
C) earnings per share
D) return on stockholders' equity

Definitions

Learning Objectives

Learning Objectives

Related questions