Question

Which ratio measures the firm’s ability to pay current interest and lease payments? Multiple Choice Total...

Which ratio measures the firm’s ability to pay current interest and lease payments?

Multiple Choice

  • Total Assets turnover ratio

  • Time interest earned ratio

  • Debt ratio

  • Cash-flow-to-debt ratio

  • Current ratio

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Homework Answers

Answer #1

The answer to this is 'time interest earned ratio'

This is because this ratio measures the ability of a company to honour its debt payments.

Why other options are incorrect

Asset turnover ratio analyses the ability of a company to use its assets to turn into revenues

Current ratio measuring the ratio of current assets and current liabilities

Debt ratio analyses the proportion of companies assets finances by debt

Cash flow to debt ratio measures the proportion of cash flow from operation to debt

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