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**CFA Practice Question**

The fixed-charge coverage ratio will always be equal to or ______ than times interest earned, and the current ratio will always be equal to or ______ than the quick ratio.

A. less; greater

B. less; less

C. greater; greater

**Explanation:**Fixed-charge coverage includes lease expenses and other fixed charges not in the times interest earned ratio. The current ratio includes inventory in the numerator while the quick ratio does not.

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**User Contributed Comments**
2

User |
Comment |
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justbassbaby |
Maybe I am smoking here but I dont think the first part is right. For an example, if EBIT=10, Interest = 20, fixed charge = 20, then (EBIT+Fixed charge)/(interest+fixed charge)=30/40=0.75, which is greater than times interest earned ratio 10/20=0.5, so you cannot say fixed charge ratio is always equal or less than times interests earned ratio |

Jurrens |
fixed is included in times interest earned |