Question

g provides the following income statement for 20X9: Net Sales $240,000 Cost of Goods Sold 110,000 Gross Profit $130,000 Operating Expenses: Selling Expenses 45,000 Administrative Expenses 12,000 Total Operating Expenses 57,000 Operating Income $73,000 Other Income and (Expenses): Loss on Sale of Capital Assets (29,000) Interest Expense (1000) Total Other Income and (Expenses) (30,000) Income Before Income Taxes $43,000 Income Tax Expense 5000 Net Income $38,000 Calculate the times-interest-earned ratio.

Answer 1

Answer: 44 times

Step-by-step explanation:

Times interest earned ratio aims to show just how much the company is able to cover its interest obligations using its operating income.

Times interest earned ratio = Net income before interest / Interest expense

Net income before interest = Operating income loss on sale of capital assets

= 73,000 - 29,000

= $44,000

Times interest earned ratio = 44,000 / 1,000

= 44 times