Explain how to calculate times interest earned and how it is used to analyze a company's risk.
What will be an ideal response?
The times interest earned ratio is calculated by dividing a company's net income before interest expense and income taxes by interest expense. The ratio reflects a company's ability to pay interest and earn a profit for its owners against declines in sales. A low ratio indicates that the default risk on liabilities is high.
You might also like to view...
Kerry Corporation acquires the publicly traded debt of Jett Corporation on December 31, Year 1 as a temporary investment of excess cash. The securities mature in 4 years. How will the securities be recorded on Kerry's December 31, Year 1 financial statement?
a. as long-term investment in marketable equity securities b. as current assets-marketable securities c. as bonds payable d. as short-term investment in marketable equity securities e. in a reserve account for future operating cash needs
Daniel knew his performance appraisal was coming up in one month. He spent that month coming to work early and staying late. As a result, he got an excellent rating on his performance appraisal when his performance for the entire year had only been average. It is likely his manager made an error due to _______.
A. bias B. contrast C. proximity D. recency E. ranking
The graphical method is appropriate for solving simple linear programming problems involving ______ decision variables.
a. one b. two c. three d. four
Which of the following terms refers to a passive, destructive response in which interest and effort in the job decline?
A. loyalty B. voice C. exit D. neglect E. ignorance