Suppose that a firm has both fixed-rate and floating-rate debt outstanding. What effect will a decline in interest rates have on the firm's times-interest-earned ratio

Answer and Explanation:

The times interest earned ratio refers to the ration that shows a relationship between the earnings before interest and taxes and the interest payments. In the case when the rate of interest declines so the interest payment would also be reduced that result in an increment of the times earned ratio keeping the EBIT unchanged.

This represents that the company has the good capacity to coverup the interest payments

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