Question

and Associates reported the following amounts on its 2018 income​ statement: Year Ended December 31, 2018Net income$60,500Income tax expense12,100Interest expense 5,000 What was McDaniel​'s ​times-interest-earned ratio for 2018​?

Answer 1

15.52 times

Step-by-step explanation:

The formula to compute the times interest earned ratio is shown below:

Times interest earned ratio = (Earnings before interest and taxes) ÷ (Interest expense)

where,

Earnings before interest and taxes would be

= Net income + income tax expense + interest expense

= $60,500 + $12,100 + $5,000

= $77,600

And, the interest expense is $5,000

Now put these values to the above formula

So, the ratio would equal to

= $77,600 ÷ $5,000

= 15.52 times