1 - Hsu Company reported the following on its income statement: Interest expense
ID: 2537366 • Letter: 1
Question
1 - Hsu Company reported the following on its income statement:
Interest expense was $62,393. Hsu Company's times interest earned ratio (rounded to two decimal places) is
a.4.98 times
b.3.49 times
c.5.98 times
d.2.49 times
2-
The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the question that follow.
Using the data provided for Diane Company, what is the price-earnings ratio?
a.2.5 times
b.4.0 times
c.8.0 times
d.6.0 times
Income before income taxes $310,782 Income tax expense 93,235 Net income $217,547Explanation / Answer
1) times interest earned ratio :
Times interest earned ratio = Income before interest and tax/interest expense
= (310782+62393)/62393
Times interest earning ratio = 5.98
so answer is c) 5.98 Times
2) Eps = Net income/share outstanding = 20000/6000 = 3.33 per share
Price earning ratio = MPS/EPS = 20/3.33 = 6.0 times
so answer is d) 6.0 Times
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