Question

In: Accounting

Use the following information from separate companies a through f: Net Income (Loss) Interest Expense Income...

Use the following information from separate companies a through f:

Net Income (Loss) Interest Expense Income Taxes
a. $ 200,000 $ 96,000 $ 50,000
b. 194,600 75,894 70,056
c. 203,100 8,124 97,488
d. 170,000 40,800 71,400
e. 130,000 16,900 49,400
f. (56,000 ) 72,800 0



Compute times interest earned.

Solutions

Expert Solution

Times interest earned ratio
Company Choose Numerator / Choose Denominator = Times interest earned ratio
Income before interest and taxes / Interest expense = Times interest earned ratio
a. $346,000 / $96,000 = 3.60
b. $340,550 / $75,894 = 4.49
c. $308,712 / $8,124 = 38
d. $282,200 / $40,800 = 6.92
e. $196,300 / $16,900 = 11.61
f. $16,800 / $72,800 = 0.23

Explanation :

Income before interest and taxes = Net income + Interest + Income taxes

Company A :

Income before interest and taxes = $200,000 + $96,000 + $50,000

= $346,000


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