Times interest earned The following data were taken from recent annual reports o

Question

Times interest earned The following data were taken from recent annual reports of Caliber Company, which operates a low-fare airline service to more than 50 cities in the United States: Current Year $45,000 184,500 Preceding Year $49,000 102,900 Interest expense Income before income tax a. Determine the times interest earned ratio for the current and preceding years. Round to one decimal place Current year Preceding year b. Although Caliber Company had enough earnings to pay interest in the preceding year, the ? in this ratio will be by the debtholders

Explanation / Answer

a Current year 5.1 =(184500+45000)/45000 Preceding year 3.1 =(102900+49000)/49000 b Although Caliber Company had enough earnings to pay interest in the preceding year, the improvement in this ratio will be welcomed by the debtholders

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