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A firm has an operating profit (EBIT) of $600 on sales of $1,000. Interest expense is $250 and taxes are $120. What is the times interest earned ratio?
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A firm has an operating profit (EBIT) of $600 on sales of $1,000. Interest expense is $250 and taxes are $120. What is the times interest earned ratio?

User Hilaj S L
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1 Answer

2 votes

Answer:

2.4 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)

= $600 ÷ $250

= 2.4 times

In order to find out the times interest earned ratio, we divide the operating profit or earnings before interest and taxes by the interest expense so that it could come

User Galya
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