When Times interest earned ratio is equal 0.90 to 1, it means that: a. The firm will default on its interest payment O b. The cash flow is less than the net income O. The cash flow exceeds the net income O d. Net income is less than the interest expense

When Times interest earned ratio is equal 0.90 to 1, it means that: a. The firm will default on its interest payment O b. The cash flow is less than the net income O. The cash flow exceeds the net income O d. Net income is less than the interest expense

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

uestion When Times interest eamed ratio is equal 0.90 to 1, it means that; & The firm will default on its interest payment ) b. The cash flow is less than the netincome D ¢ The cash flow exceeds the netincome O d. Netincome is less than the interest expense

When Times interest earned ratio is equal 0.90 to 1, it means that:
d
a. The firm will default on its interest payment
out of
O b. The cash flow is less than the net income
Oc.
The cash flow exceeds the net income
question
O d. Netincome is less than the interest expense
2.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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