Based on the information in Table 4-2, the times interest earned ratio is a. 8.6

Question

Based on the information in Table 4-2, the times interest earned ratio is

a. 8.65
b. 11.48
c. 4.88
d. 5.25

Balance Sheet ssets: $400,000 1,415,000 1,847,500 Cash and marketable securities ccounts receivable Inventories Prepaidl expenses Total current assets Fixed assets 24,000 3,686,5 2,800,000 Less: accum, depr.(1,087,500) Net fixed assets Total assets $5,399,000 Liabilities $600,000 ccounts pavable Notes payable Accrued taxes Total current liabilities 875 92,000 $1,567,000 ng-term debt Common Stock (100,000 shares) Retained Eanings Total liabilities and owner's equity 900,000 700,000 2,232,000 $5,399,000 Net sales (all credit) Less: Cost of goods sold Selling and administrative expense Depreciation expense Interest expense Earnings before taxes Income taxes Net income $6,375,000 (4,375,000) (1,000,000) (135,000) (100,000) $765,000 (306,000) $459,000

Explanation / Answer

Times interest earned ratio = EBIT/Interest Expenses

Times interest earned ratio = (EBT+Interest Expenses)/Interest Expenses

Times interest earned ratio = (765000+100000)/100000

Times interest earned ratio = 8.65 times

Answer

a. 8.65

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