The information related to Outloud Music, Inc. is given below: Year ended Decemb
ID: 2457004 • Letter: T
Question
The information related to Outloud Music, Inc. is given below:
Year ended December Year ended December
31, 2016 31, 2017
Net Income $81,510 $210,570
Income Tax Expense 55,910 103,505
Interest Expense 6,595 59,505
Calculate the times-interest-earned ratio for each year and also state the percentage change in the ratio.
31, 2016 31, 2017
Net Income $ 81,510 $ 210,570
Income Tax Expense 55,910 103,505
Interest Expense 6,595 59,505
EBIT $ 144,015 $ 373,580
Times-interest-earned ratio (EBIT / Interest Expense) xx xx
Percentage Change [(xx - xx) / xx × 100 ] xx%
Explanation / Answer
2016 2017
Times interest earned ratio = EBIT / Interest $144015 / $6595 $373580/$59505
= 21.84 = 6.28
% change 21.84-6.28 / 21.84 x100
= 15.56/21.84 x100
= 71.25%
the ratio has come down by 71.25%
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