Question

What is one difference between the current ratio and the times interest earned ratio?

Answer #1

Difference between current ratio and times interest earned ratio:

Current Ratio |
Times Interest Earned Ratio |

Liquidity ratio |
Solvency Ratio |

Measures the company's ability to meet its short-term obligations. |
Measures the company's financial ability to meet the interest burden on debt. |

Measures the readiness of current assets to conversion to cash for the discharge of current liabilities. |
Measures the company's earnings before interest and taxes ability to cover the interest on debt. |

Current ratio = current assets/current liabilities |
Times Interest Earned Ratio = EBIT/Interest Expense |

The difference between fixed charge coverage and times
interest earned ratio is
A- tax expense
B- noncontrolling interest
C- the interest portion of rental
D- all fixed costs
The cash ratio
A- is cash equivalents plus marketable securities
divided by current liabilities
B- compares cash to accounts payable
C- is not useful as a measure of short term
liquidity
D- is not recommended for use with speculative
companies

1) What is the measure of indebtedness?
Quick ratio
Current ratio
Times interest earned
Debt ratio
2) Do you want this measure higher or lower?
Higher
Lower

Ratio of Liabilities to Stockholders' Equity and Times Interest
Earned
The following data were taken from the financial statements of
Hunter Inc. for December 31 of two recent years:
Current Year
Previous Year
Accounts payable
$626,000
$310,000
Current maturities of serial bonds payable
550,000
550,000
Serial bonds payable, 10%
2,520,000
3,070,000
Common stock, $1 par value
90,000
120,000
Paid-in capital in excess of par
1,020,000
1,020,000
Retained earnings
3,510,000
2,790,000
The income before income tax was $1,013,100 and $886,500 for...

Ratio of Liabilities to Stockholders' Equity and Times Interest
Earned
The following data were taken from the financial statements of
Hunter Inc. for December 31 of two recent years:
Current Year
Previous Year
Accounts payable
$522,000
$140,000
Current maturities of serial bonds payable
320,000
320,000
Serial bonds payable, 10%
1,300,000
1,620,000
Common stock, $1 par value
60,000
70,000
Paid-in capital in excess of par
670,000
680,000
Retained earnings
2,330,000
1,850,000
The income before income tax was $469,800 and $411,100 for...

Which of the following generally indicates a positive
change?
The current ratio decreases.
The times-interest-earned ratio decreases.
The number of days' sales in receivables decreases.
The inventory turnover ratio decreases.
Which of the following methods of cost estimation utilizes all
observations and relies on statistical measures to determine the
cost estimation model?
Least-Squares Regression
Linear Programming
High-Low Method
Scatter Diagram
Facility level activities of an organization would not
include:
Building maintenance costs
State property taxes
Machine set-up between jobs
The...

What is the difference between current ratio and quick
ratio?

Long-term debt ratio
0.1
Times interest earned
8.0
Current ratio
1.4
Quick ratio
1.0
Cash ratio
0.4
Inventory turnover
4.0
Average collection period
73
days
Use the above information from the tables to work out the
following missing entries, and then calculate the company’s return
on equity. Note: Turnover and the average collection period are
calculated using start-of-year, not average, values. (Enter
your answers in millions. Round intermediate calculations and final
answers to 2 decimal places.)
Long-term debt ratio
0.1...

Calculate Delta Airlines times-interest-earned ratio for the
year end for 2016 and What does this tell you about the
company?

Times interest earned Loomis, Inc. reported the following on the
company’s income statement in two recent years: Current Year Prior
Year Interest expense $231,000 $277,200 Income before income tax
expense 2,887,500 3,381,840 a. Determine the times interest earned
ratio for the current year and the prior year. Round to one decimal
place. Current year Prior year b. Is the number of times interest
charges are earned improving or declining? Improving

Calculate delta airline's times-interest-earned ratio for the
year end. What does this tell you about delta airlines? (reference
required to support the answer)

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