Based on the information in the table, calculate the firm\'s Interest Coverage r

Question

Based on the information in the table, calculate the firm's Interest Coverage ratio (also called Times Interest Earned) Round the answers to two decimal places. Balance Sheet December 31, 2010 Cash and marketable securities $287,000 $61,200 551,900 $400,100 $415,000 $376,000 $1,038,200 1,414,200 $2,229,300 $102,000 Accounts payable Accounts receivable $299,000 Notes payable Inventories Prepaid expenses Total current assets 510,300 $1,039,300 $1,502,000 Accrued expenses Total current liabilities Long-term debt Par value and paid-in- Gross fixed assets- capital Less accumulated $31.00 Retained Earnings depreciation Net fixed assets Common Equity Total liabilities and owner's equity Total assets S2,229,300 Income statement, Year of 2010 Net sales (all credit) 56,387,700.00

Explanation / Answer

Interest coverage ratio = EBIT/ INterest expense

= 1167802/ 50600

= 23.08

Hence the business earns 23.08 times the amount of interest as EBIT.

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