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Basic Question 2 of 3
Which of the following is the formula for computing the times-interest-earned ratio?
B. Interest expense divided by operating profit
C. Operating profit divided by interest expense
A. Net income divided by interest expense
B. Interest expense divided by operating profit
C. Operating profit divided by interest expense
User Contributed Comments 5
| User | Comment |
|---|---|
| kalps | I thought it was earning before interest and tax which would be operating profit + interest |
| eavotri | Operating profit is EBIT |
| dlo1 | Operating profit = Net Sales - COGS - Operating expenses. This excludes interest expense and tax. |
| gullan | the times-interest-earned ratio is also called interest coverage. |
| PaulC | times-interest-earned ratio |
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Learning Outcome Statements
calculate and interpret activity, liquidity, solvency, and profitability ratios
describe relationships among ratios and evaluate a company using ratio analysis
CFA® 2024 Level I Curriculum, Volume 3, Module 11.