Question

Express Company reported sales of $770,000 in the year 2013. Interest expense for the year amounted to $10,800; income tax expense, $33,000; and selling and administrative expense, $14,000. The company reported net income after taxes of $42,000. Compute the times interest earned ratio for the year.

A. 6.94
B. 2.60
C. 7.94
D. 9.24

Answer 1

C. 7.4

Step-by-step explanation:

Computation for the times interest earned ratio for the year

First step is to get the EBIT

Net income $42,000

Add Income tax expense $33,000

Add Interest expense $10,800

EBIT $85,800

Now let Compute the times interest earned ratio for the year using this formula

Times interest earned ratio=EBIT/Interest expense

Let plug in the formula

Times interest earned ratio=$85,800/$10,800

Times interest earned ratio=7.94

Therefore the times interest earned ratio for the year will be 7.94