What does the times-interest-earned ratio measure?

The times-interest-earned ratio measures a company's ability to meet its interest payment obligations with its earnings before interest and taxes (EBIT). This ratio is calculated by dividing EBIT by interest expenses. It provides insight into how comfortably an organization can pay its interest obligations, which is crucial for assessing financial stability and creditworthiness. A higher ratio indicates that the company earns significantly more than its interest obligations, suggesting lower financial risk related to interest payments. This makes the ratio an important indicator for creditors and investors assessing the company’s risk level and financial health.

Given this context, the other options do not pertain directly to the times-interest-earned ratio. Profitability relates to overall earnings performance, cash flow from operations focuses on liquidity and cash management, and revenue growth measures sales performance over time, rather than specifically addressing interest payment capabilities.