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A potential bondholder is considering four companies for investment. Which company has the lowest likelihood of defaulting on their interest payments?

Company 3 has a times interest earned ratio of 9.1.
Company 4 has a times interest earned ratio of 14.3. Company 2 has a times interest earned ratio of 5.2.
Company 1 has a times interest earned ratio of 12.7.

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Answer:

Company 4 has a times interest earned ratio of 14.3.

Step-by-step explanation:

The times interest earned (TIE) ratio is a measure of a company's ability its ability to pay its debts based on its current income. Is an indication of a company's relative freedom from the constraints of debt

A higher TIE number shows that a company has enough cash after paying its obligations to continue to invest in the business.

In this particular case, it is company 4, because its TIE is the highest

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