12. 3.20 points value: Exercise 9-14 Computing and interpreting times interest e

Question

12. 3.20 points value: Exercise 9-14 Computing and interpreting times interest earned LO A1 Use the following information from separate companies a through f. Interest Expense $39,600 41,840 6,786 22,440 15,730 68,376 Income Taxes $27,500 37,656 54,288 39,270 27,170 Net Income (Loss) $110,000 104,600 113,100 93,500 71,500 (30,800) C. Compute times interest earned Times Interest Earned Ratio Company Choose Numerator: Choose Denominator: Ratio times times times times times times Which company indicates the strongest ability to pay interest expense as it comes due? Company a Company b Company c Company d Company e Companyf

Explanation / Answer

Time interest earned ratio :

Company C indicates the strongest ability to pay interest expense as it comes due

Choose numerator / Choose denominator = Times interest earned Income before interest and tax / Interest expense = Times interest earned a 177100 / 39600 = 4.47 b 184096 / 41840 = 4.40 c 174174 / 6786 = 25.67 d 155210 / 22440 = 6.92 e 114400 / 15730 = 7.27 f 37576 / 68376 = 0.55

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