Question

In: Accounting

Determine the times interest earned ratio. Round to one decimal place.

A company reports the following:

Income before income tax $4,000,000

Interest expense 400,000

Determine the times interest earned ratio. Round to one decimal place.

Solutions

Expert Solution

Times Interest earned ratio : Times interest earned ratio measures how many times profits before interest and taxes can cover interest expenses. To begin, total your income before taxes and interest expenditure. The total should then be divided by the interest expense.

Times Interest earned ratio = Income before income tax + Interest expense / Interest expense

=$8,000,000 + $500,000 / $500,000

=17.0 times

Therefore,times interest earned ratio is 17.0 times

balaji rao answered 2 years ago
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