Question

A company had interest expense of $7,200, income before interest expense and income taxes of $18,800, and net income of $9,200. the company's times interest earned ratio equals: Options:

A) 2.61
B) 4.67
C) 3.61
D) 5.21

Answer 1

The times interest earned ratio for the company is calculated by dividing the income before interest and taxes by the interest expense, resulting in 2.61.

Step-by-step explanation:

The times interest earned ratio is a financial metric that helps to understand a company's ability to meet its debt obligations. To calculate the times interest earned ratio, you divide the income before interest expense and taxes by the interest expense. In this case, the calculation would be $18,800 / $7,200 which equals 2.61.The times interest earned ratio measures a company's ability to pay its interest obligations.

It is calculated by dividing the company's income before interest expense and income taxes by its interest expense.In this case, the company has an income before interest expense and income taxes of $18,800 and an interest expense of $7,200. So, the times interest earned ratio would beTimes Interest Earned Ratio = Income Before Interest Expense and Income Taxes / Interest Expens= $18,800 / $7,200≈ 2.61Therefore, the correct answer is option A) 2.61.