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21 September, 19:41

A company's interest expense is $9,000. Its income before interest expense and income taxes is $38,250. Its net income is $11,850. The company's times interest earned ratio equals:

(A) 0.235.

(B) 0.76.

(C) 3.23.

(D) 4.25.

(E) 0.31.

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Answers (1)
  1. 21 September, 20:08
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    (D) 4.25.

    Explanation:

    The company's times interest earned ratio is a financial measure given as the earnings before interest and taxes (EBIT) divided by the total interest payable on debts.

    Times interest earned = net income before interest and tax / Interest payable

    = $38,250/$9,000

    = 4.25

    This means that the company's earnings before interest and taxes can settle its interest 4.25 times.
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Home » Business » A company's interest expense is $9,000. Its income before interest expense and income taxes is $38,250. Its net income is $11,850. The company's times interest earned ratio equals: (A) 0.235. (B) 0.76. (C) 3.23. (D) 4.25. (E) 0.31.
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