16 Sanchez Corporation Selected Financial Information 12/31/16 20,000 100,000 19

Question

16 Sanchez Corporation Selected Financial Information 12/31/16 20,000 100,000 190,000 310,000 230,000 200,000 40,000 300,000 12/31/15 $ 25,000 110,000 155,000 290,000 210,000 190,000 50,000 260,000 Cash Accounts receivable (net) Inventories Total current assets Noncurrent assets Current liabilities Long-term liabilities Shareholders' equity Net income Interest expense Income tax expense $40,000 10,000 20,000 The times interest earned ratio is: OA) 4.0 times OB) 5.0 times C) 6.0 times D) 7.0 times

Explanation / Answer

Times interest earned ratio=Earnings before interest and taxes/interest expense

=(70000/10000)

which is equal to

=7 times.

Earnings before interest and taxes(balance)(60000+10000) $70000. Less:interest expense (10000) Earnings before taxes(40000+20000) $60000 Less:income tax expense (20000) Net income 40000

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