Creighton Company reported the following on the company's income statement for the year. Interest expense $600,000 Income before income tax expense 4,200,000 What is the times interest earned ratio? a. 7.0 b. 8.0 c. 6.0 d. None of these choices are correct.

The correct answer is A.

Explanation:

Giving the following information:

Interest expense = $600,000

Income before income tax expense = 4,200,000

To calculate the interest earned ratio we need to use the following formula:

Times interest earned ratio = earnings before interest and tax / interest rate

Times interest earned ratio = 4,200,000/600,000 = 7