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One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt

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One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. For Rich Corporation, $100,000 of bonds paying 8.5% annually are outstanding. Income before interest and taxes is $50,000. How would Rich Corporation calculate the interest coverage (accrual basis) ratio? Income before interest and taxes divided by the interest expense. Income before interest and taxes divided by carrying value of the bonds outstanding. Income before interest and taxes divided by the face value on bonds. Face value of the bonds divided by income before interest and taxes

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