A company has an operating income of \$120,000 and an interest expense of \$40,000. Can the company cover its interest expenses from core operations?

• A. No, the times interest earned ratio is 0.5.
• B. Yes, the times interest earned ratio is 3, indicating coverage.
• C. Yes, the times interest earned ratio is 2.
• D. No, the times interest earned ratio is less than 1.

Answer: (B)