The information related to interest expense of classic music, inc. is given below:

Net Income $265,000

Income tax expense 105,000

Interest expense 66,000

Based on the above data, which of the following is the times - interest - earned ratio? (round the final answer to two decimal places)

A) 6.61 times

B) 4.15 times

C) 5.02 times

D) 4.02 times

The times - interest - earned ratio is 6.61 times. The right answer is A.

Explanation:

In order to calculate the times - interest - earned ratio we would have to make the following calculation:

times - interest - earned ratio=Income before interest and taxes/Interest expense

According to given data

Income before interest and taxes=Net Income+Income tax expense + Interest expense

Income before interest and taxes=$265,000+$105,000+$66,000

Income before interest and taxes=$436,000

Therefore, times - interest - earned ratio=$436,000/$66,000

times - interest - earned ratio = 6.61 times