Why is the fixed charge coverage ratio a broader measure of a firms coverage capabilities than the

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Why is the fixed charge coverage ratio a broader measure of a firm’s coverage capabilities than the times interest earned ratio?

(a) The fixed charge ratio indicates how many times the firm can cover interest payments.

(b) The times interest earned ratio does not consider the possibility of higher interest rates.

(c) The fixed charge ratio includes lease payments as well as interest payments.

(d) The fixed charge ratio includes both operating and capital leases whereas the times interest earned ratio includes only operating leases.

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Understanding Financial Statements

ISBN: 9781292101552

11th Global Edition

Authors: Lyn Fraser, Aileen M. Ormiston

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